How is BOK Monitoring Inflation Amid External Threats?
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Synopsis
In light of rising geopolitical tensions and U.S. tariffs, the Bank of Korea remains vigilant in monitoring inflation, currently estimated at around 2 percent. As the Chuseok holiday approaches, increased cash supply aims to meet heightened demand amidst fluctuating interest rates.
Key Takeaways
- Inflation is projected at 2%.
- External uncertainties include U.S. tariffs.
- Cash supply increased for Chuseok.
- Consumer prices rose 2.1% year-on-year.
- The holiday period is longer than usual.
Seoul, Oct 2 (NationPress) The Bank of Korea (BOK) has projected that inflation will remain stable at approximately 2 percent. However, high levels of uncertainty persist, driven by the United States' tariff policies and various geopolitical risks, as stated by the central bank on Thursday.
During a meeting to assess inflation trends, BOK Deputy Governor Kim Woong noted that recent government data indicated that consumer prices increased by 2.1 percent year-on-year in September, marking a return to the 2 percent threshold within a month, according to reports from Yonhap News Agency.
"The September figure aligns with previous forecasts as the temporary impact of reduced telecommunications fees concluded. Prices for agricultural, livestock, and fisheries products witnessed slower growth due to improved weather conditions and government measures aimed at stabilizing prices," Kim stated.
"Looking forward, we anticipate that prices will hover around the 2 percent mark; however, the BOK will continue to closely monitor inflation trends, given the increased volatility in exchange rates and oil prices amidst uncertainties related to U.S. tariff policies and geopolitical challenges," he added.
Additionally, the BOK announced on Thursday that it has provided more cash for this year's Chuseok holiday compared to the previous year, in response to heightened demand due to an extended holiday period and decreasing market interest rates.
During the past ten working days from September 19, the central bank injected 4.42 trillion won (approximately US$3.15 billion) in new currency into banks and financial institutions, marking a 17.9 percent increase from last year's holiday season figures, as reported by the BOK.
This larger cash supply corresponds with the current year's holiday period, which is longer than usual, falling between two national holidays—National Foundation Day on October 3 and Hangeul Day on October 9, which commemorates the Korean alphabet.
The increased cash demand is also attributed to declining market interest rates, as indicated by the BOK.
In total, the central bank issued 4.83 trillion won in cash and withdrew 307.8 billion won from circulation over the ten-day period, leading to a net issuance of 4.42 trillion won.
Point of View
I believe that such vigilance is crucial for safeguarding consumer interests and ensuring confidence in the financial system.
NationPress
02/10/2025
Frequently Asked Questions
What is the current inflation rate in South Korea?
The current inflation rate in South Korea is projected to be around 2 percent.
What factors are contributing to inflation uncertainties?
Uncertainties are primarily driven by the United States' tariff policies and geopolitical risks.
How much cash did the BOK supply for Chuseok this year?
The Bank of Korea supplied 4.42 trillion won (approximately US$3.15 billion) for this year's Chuseok holiday.
What is Chuseok?
Chuseok is a major harvest festival in South Korea, celebrated with family gatherings and traditional food.
Why is the BOK increasing cash supply?
The BOK is increasing cash supply to meet rising demand due to a longer holiday period and lower market interest rates.
