★Monetary Policy Decision & Opening Remarks to the Press Conference (November 24, 2022) | Press Releases(상세) | News | News & Publications |  Bank of Korea
Central bank: bok | Type: statement | Date: 2022-11-24

★Monetary Policy Decision & Opening Remarks to the Press Conference (November 24, 2022)
2022.11.24
Monetary Policy
Interest Rate
Economic Slowdown
정책총괄팀(02-759-4679)
Attachment
Monetary Policy Decision(2211).doc
Opening Remarks to the Press Conference(2211).docx
Monetary Policy Decision(2211).pdf
Opening Remarks to the Press Conference(2211).pdf
Monetary Policy Decision
(Statement)
be greater than forecast in August.
Currently available information suggests that the global economic slowdown has continued, affected by the high inflation, ongoing policy rate hikes in major countries and the prolonged Ukraine crisis. In global financial markets, the US dollar has weakened and long-term market interest rates have fallen, as risk aversion has partly subsided on the expectations of an adjustment to the pace of the US Federal Reserve's policy rate hikes. Looking ahead, the Board sees global economic growth and global financial markets as likely to be affected largely by the movements of international commodity prices and global inflation, monetary policy changes in major countries and US dollar trends, and geopolitical risks.
Domestic economic growth has continued to slow with exports shifting to a decrease, although private consumption has maintained its recovery trend. Labor market conditions have continued to be favorable with a low unemployment rate, despite a slowing increase in the number of persons employed. Going forward, domestic economic growth is expected to weaken, affected by the global economic slowdown and the increase in interest rates. GDP growth for this year will be consistent with the August forecast of 2.6%, but that for next year is projected to be 1.7%, considerably lower than the August forecast of 2.1%.
Consumer price inflation has remained high at 5.7% in October due to increases in electricity and gas fees and the accelerating price increases in processed food products, although increases in the prices of petroleum products have moderated. Core inflation (excluding changes in food and energy prices from the CPI) and the inflation expectations of the general public have stayed high at the lower-4% level. Looking ahead, it is forecast that consumer price inflation will somewhat decrease due to the base effect and the economic slowdown, but will remain high at the 5
% level for some time. Consumer price inflation is projected to be 5.1% in 2022 and 3.6%
in 2023, slightly below the August forecast of 5.2% in 2022 and 3.7% in 2023, but uncertainties are judged to be high related to the movements of exchange rates and global oil prices, the degree of economic slowdown at home and abroad, and the size of increases of electricity and gas fees.
In the financial and foreign exchange markets, the long-term Korean Treasury bond yield and Korean won to US dollar exchange rate have decreased and stock prices have risen due to expectations of an adjustment to the pace of monetary tightening in major countries. However, in the short-term financial markets, yields on project financing asset-backed commercial paper (PF-ABCP) have risen significantly and their transactions have shrunk. Household loans have increased only slightly and housing prices have further decreased in all parts of the country.
The Board will continue to conduct monetary policy in order to stabilize consumer price inflation at the target level over a medium-term horizon as it monitors economic growth, while paying
attention to financial stability. The Board sees continued rate hikes as warranted for some time, as inflation is expected to remain high, substantially above the target level, although the domestic
economic growth rate has slowed. In this process the Board will determine the size and pace of further increases of the Base Rate while thoroughly assessing the degree of persistence of high inflation, the pace of growth, monetary policy changes in major countries, financial stability conditions, and geopolitical risks.
Opening Remarks to the Press Conference (November 24, 2022)
First, looking at the changes in external conditions since the October MPB meeting, the global economic slowdown continued, due to high inflation and the resultant policy rate hikes in major countries. Specifically, the US economy has seen slowing growth, led by domestic demand. There has been growing concern about economic recession in the euro area, due to energy supply disruptions and heightened price level. The Chinese economy remains sluggish due to declines in property investment and exports. As for the global financial markets, the US Federal Reserve suggested in its November FOMC meeting that it could adjust the pace of its policy rate hikes, although the terminal federal funds rate could be higher than previously expected, and US price indicators also came in below market expectations. Accordingly, risk aversion, which had been greatly heightened, has partially eased. Consequently, the US dollar has weakened significantly, long-term market interest rates in major countries have fallen, and stock prices have risen.
Our domestic economic growth has continued to slow. Although consumption has maintained its recovery momentum, export growth has been slowing rapidly, with exports shifting to a decline in October due to weakening growth in major countries. Turning to inflation conditions, consumer price inflation remained high at 5.7% in October. Although the rise in the prices of petroleum products has slowed, electricity and gas fees have increased further, and prices of processed food have climbed faster. Core inflation and the inflation expectations of the general public are running at 4.2-4.3%.
Looking at household debt and the housing market, household loans have increased slightly, as the sustained net redemption of unsecured loans offset a rise in housing-related lending. Housing prices have further decreased in both the Seoul metropolitan area and other regions.
Consumer price inflation is expected to be 5.1% for this year and 3.6% for next year, slightly lower than the August forecasts (5.2% and 3.7%). Despite the projection that the economy would slow further, the downward adjustment to the price forecasts has not been large. This is because the accumulated cost pressure, which has been gradually reflected in electricity and gas fees, processed food, and core items, is expected to largely offset the weakening of the demand pressure from the economic slowdown. With regard to the price forecasts, there are high uncertainties surrounding movements in the exchange rate and oil prices, the degree of economic slowdown at home and abroad, and the size of hikes in electricity and gas fees. The high upward trend at the 5% level is projected to continue through early next year, reflecting the expectation of further increases in electricity and gas fees, although consumer price inflation in November could be considerably lower than in October due to the base effects of agricultural and petroleum prices. The Director General of our Research Department will provide more details about the economic outlook this afternoon.
The Board decided today to raise the Base Rate by 25 basis points. The Board sees it warranted to continue its policy response for price stability as inflation is projected to remain high at the 5% level for some time. Regarding the size of the rate hike, the Board judged that today’s 25 basis-point increase is appropriate, given that the degree of economic slowdown is expected to increase in the future, while the risks in the foreign exchange sector have subsided and funding conditions in short-term financial markets have become constrained.
All the Board members supported the decision unanimously.