Oil shock, weaker won and fiscal expansion leave incoming governor with limited room to manage inflation or growth

The Bank of Korea’s (BOK) decision on Friday to hold its benchmark rate at 2.5% for a seventh consecutive meeting, the final move before Shin Hyun-song replaces Gov. Rhee Chang-yong, comes as inflation, growth, exchange rates and fiscal policy move in conflicting directions that limit monetary policy.

The decision comes as energy prices remain elevated following the U.S.-led war in Iran, the won trades near multi-year lows and fiscal authorities prepare a large supplementary budget to cushion the shock.

The Bank of Korea’s (BOK) decision on Friday to hold its benchmark rate at 2.5% for a seventh consecutive meeting, the final move before Shin Hyun-song replaces Gov. Rhee Chang-yong, comes as inflation, growth, exchange rates and fiscal policy move in conflicting directions that limit monetary policy.

The decision comes as energy prices remain elevated following the U.S.-led war in Iran, the won trades near multi-year lows and fiscal authorities prepare a large supplementary budget to cushion the shock.

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