Bank of Korea’s Shin Signals Hawkish Stance, Says Policy Will Prepare for High Growth and High Rates

Bank of Korea Governor Shin Hyun-song told lawmakers on Friday that the central bank will shape its policy around a future of stronger growth and higher interest rates, signalling that its hawkish stance is set to continue, Yonhap reported.

Shin made the remarks during a parliamentary audit at the National Assembly’s Finance, Economy, Planning and Budget Committee on October 23, according to the Korea Times and Korea JoongAng Daily, which both carried the Yonhap report.

Growth seen above 3%

Responding to a question from Rep. Kim Tae-nyeon of the ruling Democratic Party, Shin agreed that it would be difficult for South Korea to return to an era of ultra-low rates. He said the bank would carry out policy in preparation for an environment “characterized by high growth and high interest rates.”

The governor said the South Korean economy could expand by more than 3% both this year and next, with exports linked to artificial intelligence driving the gains. He declined to give a precise figure for this year’s growth forecast, while noting that the OECD had revised its 2026 projection for South Korea to 3.7%.

The Bank of Korea’s own forecast for 2026 growth stands at 3.3%, raised from 2.6% in August, according to the reports.

Rates on hold after two hikes

Shin’s comments came a day after the central bank kept its base rate unchanged at 3% at its rate-setting meeting on Thursday, October 22. The bank described that decision as a pause in its tightening cycle rather than a move away from its hawkish stance, citing rising oil prices, renewed uncertainty in the Middle East and a stronger-than-expected recovery.

The Bank of Korea raised its rate by 0.25 percentage point in both July and August this year, its first back-to-back increases since January 2023. Before that, it had gradually cut the rate from 3.5% to 2.5% over roughly three and a half years, the reports said.

What’s next

The central bank is expected to raise its 2026 growth forecast again at its policy meeting in November, according to the Korea Times and Korea JoongAng Daily. The reports said the bank is set to maintain its hawkish stance for some time.

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