The Bank of Korea's senior deputy governor, Ryoo Sang-dae, stated on Tuesday that the central bank is highly likely to raise interest rates again in the near future to curb inflation, provided no external shocks or other factors intervene.

"The economic cycle is in motion, and monetary policy responds to this cycle in advance," said Ryoo Sang-dae, who is also a member of the bank's monetary policy committee and will step down next week. "In July, the central bank raised the benchmark interest rate in response to the economic cycle, and if there are no special shocks or factors in the future, it is very likely to raise rates further."

Ryoo noted that the current high inflation is driven by a combination of both demand and supply factors, linked to export-led economic growth and rising oil prices due to the prolonged military conflict in the Middle East. "After the 2022 Russia-Ukraine conflict, inflation remained high due to cost-push effects following the COVID-19 pandemic," he said, noting that the benchmark rate has since risen to 3.5%. "But this time, despite tensions in the Middle East, we are facing strong demand-pull inflation, and the inflation pace is slower and more stable amid sustained economic growth."

Ryoo indicated that key economic data released since the July rate decision, including second-quarter GDP growth and July consumer prices, will influence the upcoming monetary policy decision on August 27. South Korea's economy grew by 0.6% quarter-on-quarter in the second quarter, exceeding the central bank's earlier forecast of 0.2% growth. July consumer prices rose 2.8% year-on-year, falling below 3% for the first time in three months due to stabilizing oil prices.

"For the central bank, the most important factors are whether core inflation can remain high and whether economic growth can sustain for a period of time," he said. "Monetary policy aims to respond to the economic cycle, minimize cyclical fluctuations, and stabilize inflation."