S.Korea headline inflation seen to stay about 5% through H1 2023

SEOUL  -South Korea’s central bank governor Rhee Chang-yong on Friday said country’s headline inflation is likely to stay around 5 percent through the first half of next year, which would warrant further increases in interest rates.

“Inflation in the 5 percent range could continue through the first half of next year,” Rhee said, responding to a question at a parliament session in Seoul.

“We look at supply and demand (inflationary pressures) but interest rates should increase should inflation stay above 5 percent.”

Expectations are increasing among analysts for a 50 basis point hike in the key interest rate to 3 percent when the Bank of Korea reviews policy at its Oct. 12 meeting.

Rhee has kept the door open for a continued tightening through the first half of next year, and analysts have predicted the base rate would peak at 3.5 percent in the first quarter of 2023.