Demand for an unprecedented "big-step" rate hike among policymakers of the Bank of Korea (BOK) will likely intensify ahead of an upcoming rate-setting meeting should the country's consumer prices in June rise 6 percent or higher, a high-ranking central bank official has said.
The outlook comes amid growing speculation the BOK could lean more toward the possibility of an unprecedented 0.5 percentage-point hike in borrowing costs when monetary policy board members gather on July 13 in the face of the fast-rising pressure.
The country's consumer prices, a major gauge of inflation, jumped 5.4 percent on-year in May, the fastest rise in almost 14 years, and Finance Minister Choo Kyung-ho earlier said prices could rise 6 percent in June-August. Consumer price data for June will be released early next month.
"Whether the BOK will take a big-step increase or not greatly depends on June consumer inflation data," the official told Yonhap News Agency on customary condition of anonymity. "Should prices rise 6 percent or higher, calls could get louder for a big-step move."
To tame inflation, the BOK has hiked its policy interest rate five times -- all by a quarter percentage point at a time -- since August last year to 1.75 percent.
With inflation pressure fast mounting and the possibility of an interest rate reversion with the United States due to the Federal Reserve's recent swift hikes, market watchers expect the BOK to take aggressive monetary tightening down the road, including a big-step rise.
The BOK has not raised its interest rate by 0.5 percentage point or higher at a time. It has resorted to quarter percentage-point increments when adjusting monetary policy.
In a briefing on the inflation situation last week, BOK Gov. Rhee Chang-yong told reporters the central bank will carry out its monetary policy with a priority on price stability until inflation ends its upward trend, hinting at further rate increases going forward.
Rhee has said all options, including a 0.5 percentage-point rate increase, are on the table should high inflation persist. (Yonhap)