Shin Hyun-song, nominee for Bank of Korea governor, said monetary policy response would be inevitable if geopolitical risks stemming from the Middle East become prolonged.
"Price increases due to supply shocks are unavoidable," Shin said at his confirmation hearing before the National Assembly's Strategy and Finance Committee on Thursday. "However, if the shock becomes prolonged and is reflected in inflation expectations and core prices, leading to overall price increases, monetary policy will need to play a role."
Regarding recent inflation trends, he explained, "Inflation is already above the target level and inflation expectations are also high. The key criterion is whether inflation will stabilize back to the target level after the supply shock or spread further."
Shin also distanced himself from assessments characterizing him as a "pragmatic hawk."
"The dichotomy of hawks and doves is not desirable," he said. "I agree that the Bank of Korea's primary objective is price stability, but it is not appropriate to always respond with the same tools and methods. Policy should be conducted with comprehensive consideration of economic and financial conditions."
On his previously aggressive stance on rate hikes, Shin explained, "That was during the period when global inflation surged following the Russia-Ukraine war in 2022. Swift and bold response was necessary at that time."
