Concerns are growing that South Korea’s monetary and fiscal policies are moving out of sync as the Bank of Korea hikes rates in Seoul while the government prepares a larger budget for next year. The BOK raised its benchmark rate by 0.25 percentage points to 3 percent on Thursday, its second consecutive hike. The Ministry of Planning and Budget is preparing a budget proposal that could exceed 800 trillion won, after signaling a spending increase of 10 percent or more from this year. Experts and the main opposition party warned that the mix could weaken anti-inflation efforts, while the BOK governor said the effect depends on how fiscal spending is used.
Budget Minister Park Hong-keun, left, and Bank of Korea Gov. Shin Hyun-song shake hands during a meeting at the bank's headquarters in Seoul, May 14. Courtesy of Bank of Korea
Concerns are growing that the country's monetary and fiscal policies are moving out of sync, as the central bank accelerates its tightening cycle while the government pursues an expansionary fiscal policy with next year's budget proposal expected to exceed 800 trillion won ($581 billion), experts said Friday.
The Bank of Korea (BOK) on Thursday raised its benchmark interest rate by 0.25 percentage points to 3 percent, delivering a second consecutive hike following its July increase, as it sought to contain inflationary pressures.
