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'Hawkish' Shin's BOK nomination raising expectations of tighter monetary policy

Published: 23 Mar. 2026, 18:48 Updated: 23 Mar. 2026, 19:15

Shin Hyun-song, the new nominee for governor of the Bank of Korea, speaks at a forum at the Bank of Korea, Jung District, central Seoul, on December 17, 2024. [NEWS1]

A leadership change at the Bank of Korea (BOK) is raising expectations of a shift toward tighter monetary policy under nominee Shin Hyun-song.

President Lee Jae Myung has nominated Shin, head of the Monetary and Economic Department at the Bank for International Settlements (BIS), as the next BOK governor. Shin is widely described as a “pragmatic hawk” who favors monetary tightening, drawing market attention to a possible shift in the base rate path.

Global and local investment banks released reports analyzing Shin’s monetary policy stance on Monday. Son Beom-ki, an economist at Barclays, described Shin as “a cautious hawkish economist who places importance on inflation targeting while also paying close attention to financial imbalances and credit cycles.” Kim Jin-wook, an economist at Citigroup, said Shin is “a pragmatic hawk who prioritizes price and financial stability and will maintain a data-driven approach.”

A hawk refers to a policymaker, typically at a central bank, who focuses on keeping inflation under control, even if it slows economic growth. Such figures tend to support tighter monetary policy, including raising interest rates and limiting the money supply, and place less emphasis on short-term growth or employment than on stabilizing prices.

Shin has emphasized the need for pre-emptive action before inflation expectations become entrenched. “Inflation tends to spread once it begins, so the chain must be broken at an early stage,” Shin said at a G20 conference in 2022. He is widely expected to respond actively, including through rate hikes, if price pressures materialize.

However, Shin has also cautioned against overreliance on monetary policy. “Monetary policy has limits in responding to supply shocks, and excessive reactions to temporary shocks should be avoided,” he noted in the BIS annual report in 2022.

“While Shin is fundamentally hawkish, policy responses could vary depending on how long the Middle East situation persists,” Kim Ji-na, a researcher at Eugene Investment & Securities, said.

The exterior of the Bank of Korea headquarters in Jung District, central Seoul, on Aug. 12, 2025. [YONHAP]

Changes in policy operations are also expected. Shin has stressed the need for flexible policymaking in response to changing economic conditions, and has expressed skepticism toward forward guidance that signals a preset interest rate path. “Excessive signaling by central banks can distort markets,” Chung Hyeong-ki, a researcher at DS Investment & Securities, said.

Even if tools such as the “K-dot plot,” which shows rate projections by the Monetary Policy Board over a six-month conditional horizon, remain in place, communication is likely to become more limited going forward.

Shin has also indicated a broader policy approach. “The era of controlling the economy with interest rates alone is over,” he said in an interview with the Financial Times in 2024.

Markets expect Shin to take a wait-and-see approach in the near term. “The likelihood of a pre-emptive rate hike is low unless the Middle East situation becomes prolonged,” Park Jun-oo, a researcher at Hana Securities, said.

A person sorts 50,000-won banknotes at a Hana Bank in Jung District, central Seoul, on Feb. 24. [NEWS1]

Persistently high oil prices remain a key variable. “If inflation expectations are stimulated, the likelihood of a rate hike will increase,” said Choi Ji-uk, a researcher at Korea Investment & Securities. “The base rate could be raised once in October this year, and an earlier hike in the third quarter cannot be ruled out,” he added.

“A rate hike signal could come as early as the May Monetary Policy Board meeting,” Kim Jin-wook, an economist at Citigroup said.

The base rate is expected to be held at 2.50 percent at the upcoming Monetary Policy Board meeting on April 10, the final meeting under Gov. Rhee Chang-yong. The Iran war has yet to be fully reflected, and a rate adjustment could further destabilize the foreign exchange market amid heightened volatility.

“With upward pressure on inflation likely to grow due to the war, a rate cut has effectively become difficult,” stated Joo Won, head of research at the Hyundai Research Institute. “The BOK now faces a dilemma of maintaining the current rate while weighing the timing of future hikes as the leadership transition approaches.”

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KIM WON [[email protected]]