Governor Shin Hyun-song of the Bank of Korea stated that South Korea will not mechanically follow U.S. interest rate hikes even if the Federal Reserve (Fed·Federal Reserve) shifts its monetary policy tightening stance. He emphasized that independent monetary policy decisions will be made based on a comprehensive assessment of domestic economic conditions and financial stability.
On the 28th (local time), at the '2026 Jackson Hole Economic Policy Symposium' (Jackson Hole Meeting) in Wyoming, USA, Governor Shin met with New York-based special correspondents from domestic media outlets regarding Chairman Kevin Warsh's keynote speech. He noted that the speech contained significant implications for the upcoming September Federal Open Market Committee (FOMC) meeting but drew a clear line on South Korea's response strategy.
Governor Shin analyzed that although Chairman Warsh did not outline a specific interest rate path, his message was more concrete and clear compared to the July FOMC press conference. In July, the Federal Reserve merely reaffirmed its foundational stance of targeting 2% inflation. However, in this speech, it clearly expressed its determination to actively utilize interest rates as a policy tool because: △inflation remains significantly above the target; △the period exceeding the target has lasted for 65 months; and △it intends to employ interest rate policy more aggressively.
Governor Shin stated that while Chairman Warsh did not provide specific 'forward guidance' or a dot plot (unlike previous Jackson Hole speeches by Federal Reserve chairs), he clearly communicated the Fed's resolve and policy tools to combat inflation, sending a message that it would not be swayed by market forces but would instead reassert central bank leadership. He further diagnosed that the rise in short-term bond yields and the initial slight strength followed by a downturn in the stock market immediately after the Jackson Hole speech reflected markets beginning to recognize the Federal Reserve's credibility and leadership once again.
Governor Shin emphasized, however, that the Federal Reserve's actions cannot serve as an absolute benchmark for South Korea's monetary policy. He explained, "It is not necessary to mechanically react simply by calculating the interest rate differential between South Korea and the U.S. and crossing a specific threshold. The central bank must comprehensively consider its policy intent, overall stance, and domestic financial stability conditions."
While cautioning against mechanical alignment of interest rates between the U.S. and South Korea, it is interpreted that Governor Shin left room for the possibility that additional U.S. rate hikes could influence the Bank of Korea's policy decisions. In a scenario where U.S. policy direction shifts, there is an increasing need to examine imbalances in domestic finance—including exchange rates, inflation, the real estate market, and household debt—to find the optimal policy mix.
Regarding the recent stabilization of the won/dollar exchange rate around 1,380 won, Governor Shin expressed confidence in the won's flexibility and the Bank of Korea's policy credibility. Even as the dollar index (a measure of the U.S. dollar's value against six major currencies) showed strength, he noted that the won maintained its resilience, attributing this to the Bank of Korea providing a clear direction for monetary policy and regaining control of the foreign exchange market, thereby building market trust.
Governor Shin expressed caution against explaining recent exchange rate fluctuations solely through short-term supply-demand factors such as export companies selling dollars or dollar inflows from SK Hynix's American Depositary Receipt (ADR) listing in the U.S. He stated, "In South Korea, the exchange rate is not merely a relative price reflecting trade conditions but an indicator reflecting overall economic trust and risk appetite, serving as a symbol of confidence in the financial and monetary systems." He added, "While the won/dollar exchange rate remains at a higher level compared to historical averages, the appropriate level will ultimately be determined by the market."
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