Shin Hyun-sung: Fiscal Spending Does Not Conflict with Monetary Policy

Shin Hyun-sung, the Governor of the Bank of Korea, stated that fiscal spending aimed at enhancing growth potential does not conflict with a tight monetary policy. During a press conference on the 27th, Governor Shin said, "If fiscal spending increases potential growth rates, it is not out of sync with monetary policy." He explained that the criteria for judgment are whether the fiscal measures stimulate short-term demand or lead to investments that enhance productivity and growth capacity. This statement came shortly after the Bank of Korea's Monetary Policy Committee raised the benchmark interest rate from 2.75% to 3.00%, an increase of 0.25 percentage points. Governor Shin described the consecutive rate hikes over two months as a preemptive response, citing the proverb, "A stitch in time saves nine." He indicated that while there may be one additional hike in the next four meetings, the effects of the two consecutive increases need to be assessed. The Bank of Korea has revised its GDP growth forecast for this year from 2.6% to 3.3%, and the forecast for next year has also been raised from 2.1% to 2.9%. The consumer price inflation forecast remains at 2.7% and 2.3%, while the core inflation forecast is set at 2.5%. Governor Shin's remarks are interpreted as emphasizing the nature of spending and the improvement of the economy's productive capacity rather than merely expanding fiscal measures.

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