Shin Hyunsong: "Robust Economy Means Fewer Monetary Policy Dilemmas"...Signals Another Rate Hike

At the 2026 BOK International Conference on June 1

Key Indicators Such as Inflation, Growth, Real Estate, Exchange Rates, and Household Debt

All Pointing in the Same Direction Without Conflict

"This time, all indicators are pointing in the same direction."

On June 1, at the "2026 BOK International Conference – Central Banks and the Future of Money" held at the Bank of Korea in Jung-gu, Seoul, Shin Hyun-song, Governor of the Bank of Korea, had a policy discussion with Isabel Schnabel, Executive Board Member of the European Central Bank (ECB). Governor Shin remarked, "Normally, it is difficult to operate monetary policy because indicators such as prices, growth, real estate, exchange rates, and household debt often conflict with each other, but this time, they are all pointing in the same direction." This statement sent another strong signal of a possible rate hike, following the Monetary Policy Board meeting on May 28.

Shin Hyun-song, Governor of the Bank of Korea, is speaking at the '2026 BOK International Conference' held on the morning of the 1st at the Bank of Korea in Jung-gu, Seoul. Bank of Korea

Governor Shin said, "Korea is similar to Europe in that it relies heavily on energy imports," but added, "However, Korea is different from Europe in that growth driven by the semiconductor sector is very strong." He explained, "Korea's real GDP in the first quarter grew by 3.6% year-on-year, but what is notable is that gross domestic income (GDI) surged by 12.3%. Normally, when oil prices rise, the terms of trade worsen and GDI tends to slow, but due to even greater growth in semiconductors and robust exports, we have seen these results."

As a result, Governor Shin assessed that there are few obstacles to adjusting monetary policy (raising the base rate) to respond to inflation. He stated, "The economy is resilient, and the GDP gap is expected to turn positive next year, so there is less of a dilemma. I believe we will be able to address inflation effectively."

There was also an analysis that the direction of U.S. policy rates depends on when the Strait of Hormuz reopens. Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, said, "The U.S. has maintained a somewhat restrictive monetary policy, but going forward, the key will be when the Strait of Hormuz reopens. Even if the strait were to reopen as soon as tomorrow, the speed at which supply chains and inflation recover could be slower." He further noted, "As an energy exporter, the U.S. is under somewhat less pressure, but it is not completely immune from the global impact."

(From the left in the photo) Hyun-Song Shin, Governor of the Bank of Korea, and Isabel Schnabel, Executive Board Member of the European Central Bank (ECB), are having a policy discussion at the "2026 BOK International Conference" held on the morning of the 1st at the Bank of Korea in Jung-gu, Seoul. Bank of Korea

During her keynote speech, Executive Board Member Schnabel emphasized that central banks must proactively respond to the growing trend of stablecoins. She stated, "As we saw in the case of money market funds (MMFs) in the past, once private forms of money are widely adopted, it is impossible to return to previous financial structures. Rather than resisting the expansion of stablecoins, central banks should actively ensure that innovation operates within a framework that preserves stability, monetary control, and trust."

Schnabel stressed, "Proper regulation of stablecoins is a key element in curbing financial vulnerabilities. In particular, a run on stablecoins (a mass withdrawal event) can lead to a sudden outflow of reserve assets held in banks, so close monitoring of banks' funding structures and stability is necessary."

She also expressed concern that since most stablecoin transactions are currently settled in U.S. dollars, the increasing use of stablecoins could further entrench the international dominance of the dollar. Schnabel suggested, "Central banks should work together with other stakeholders at the international level to ensure that stablecoins maintain a multi-currency character."

Meanwhile, the two-day BOK International Conference, held from June 1 to 2, features special lectures by Robert Townsend, Professor at MIT, as well as paper presentations and panel discussions. Tobias Adrian, Director of the International Monetary Fund (IMF), presented on "Financial Vulnerability and Monetary Policy," stating, "Financial vulnerabilities can affect not only financial markets but also future economic trends and the risk of recession. Therefore, monetary policy must take financial vulnerabilities into account, in addition to inflation and economic growth."

This conference was attended by many senior officials from foreign central banks and international organizations, including Junko Koeda, Member of the Policy Board at the Bank of Japan (BOJ), and Beth Ann Wilson, Director at the U.S. Federal Reserve Board (FRB). Renowned scholars such as Thomas Sargent, Professor at New York University, Robert Townsend, Professor at MIT, and Markus Brunnermeier, Professor at Princeton University, also participated.

This content was produced with the assistance of AI translation services.