[2026 National Assembly Audit] Shin Hyun-song: "Preemptive Rate Hike Ahead of U.S. Fed Bought Time"

"Also entailed lower economic costs than a delayed response," he said.

Bank of Korea Governor Shin Hyun-song said the Bank had bought itself time by raising interest rates ahead of the U.S. Federal Reserve and that this had entailed lower economic costs than responding later.

Shin Hyun-song, governor of the Bank of Korea, answers lawmakers’ questions during a parliamentary audit by the National Assembly’s Finance and Economy Planning Committee at the Bank of Korea in Jung-gu, Seoul, on the 12th. Joint coverage by Yonhap News.

Shin made the remarks on the 12th in response to a question from Democratic Party of Korea lawmaker Moon Jin-seok about the effectiveness of interest rate projections, or forward guidance, by Monetary Policy Board members during a National Assembly audit of the Bank of Korea by the Finance and Economy Planning Committee at the Bank's headquarters in Jung-gu, Seoul.

"We set the direction of monetary policy, toward raising interest rates, a little earlier than other major economies," Shin said. "A substantial part of this was already reflected in market prices this summer, particularly in May and June." He said that by moving in advance and providing guidance to the market, the Bank had also helped prevent larger changes later.

"At the time, I used the expression, 'We used a hoe to stop what would otherwise have required a shovel,'" he said. "I believe this carries far lower economic costs than being forced by the market to raise rates defensively later."

"Korean government bond yields have remained quite stable over the past two to three weeks," Shin said. "Raising the policy rate is painful, but I believe moving preemptively can help stabilize the market and ultimately reduce the costs."

Asked about U.S. Federal Reserve Chair Kevin Warsh's opposition to providing forward guidance, Shin said there were "pros and cons" and reiterated that the Bank of Korea's Monetary Policy Board planned to maintain its current system, including the dot plot, for the time being.

Shin agreed with lawmaker Moon's point that the interest rate benefits of the Bank Intermediated Lending Support Facility should be passed on more effectively to small and medium-sized enterprises and other recipients. "We regularly review the status of the Bank Intermediated Lending Support Facility," Shin said. "We need to increase the extent to which the interest rates on funds raised are passed on to borrowers through financial institutions' risk management."

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