“You need to carefully look at the suppressed demand spurt, international raw material prices, etc.”
(Seoul = Yonhap News) Reporter Shin Seong Seo-ho = The Bank of Korea diagnosed that the possibility of rapid inflation (increased inflation) in Korea and other major countries in the world is not high.
According to the’Monetary Credit Policy Report’ submitted by the BOK to the National Assembly on the 11th, as the monetary policy easing to respond to Corona 19 was reflected in the financial market, the expected inflation indicators (BEI· The 10-year KTB) has been on the rise since March last year.
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The inflation expectations of the general public in Korea and the United States (the next one year) revealed in a survey (survey) also rose due to the recent rise in international raw materials and food prices and expectations for economic improvement.
In its report, the BOK said, “There is generally a consensus on the fact that inflation rates can increase in the short term, such as the outburst of demand and base effects, which were suppressed after Corona 19, but opinions differ on the direction of inflation in the mid- to long-term clock.”
The expansion of liquidity due to large fiscal expenditures and weakening of the global supply chain (GVC) are factors that pressure inflation, but there are many factors to suppress inflation, such as stable long-term inflation, the central bank’s response to inflation, and sluggish employment.
BOK said, “If you put together our opinions, the possibility of a rapid expansion of inflation (in Korea and major countries) is limited in a situation where the uncertainty caused by Corona 19 is still large,” but said, “However, the demand that was suppressed by the rapid economic recovery and normalization of economic activities due to vaccination, etc. “If there is an eruption and the international raw material price rises, the possibility that inflation will increase more than expected can not be ruled out, so we need to watch the trend carefully,” he said.
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As for the increase in domestic long-term interest rates since the second half of last year, it was analyzed as “a result of the addition of external factors such as rising interest rates in major countries due to global economic recovery and inflation expectations, and domestic supply and demand factors such as the expansion of KTB issuance.”
The BOK said, “In the future, long-term domestic interest rates are expected to be affected by fiscal and monetary policies and corona trends in major countries, changes in government bond rates in major countries, domestic economic recovery and the supply and demand situation of government bonds, so we will closely monitor and respond appropriately.”
Earlier, on the 26th of last month, the BOK announced a plan to simply purchase KTBs worth 5 to 7 trillion won in total in the first half of the year to reduce market interest rate volatility.
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2021/03/11 12:00 sent