How to survive in the age of inflation

“Even if it is not popular, it is necessary to preemptively signal an interest rate hike to stabilize expectations.”

This is the answer that Lee Chang-yong, the governor of the Bank of Korea, who has been leading the Bank of Korea since April 21, recently revealed at a personnel hearing at the National Assembly Planning and Finance Committee about future monetary policy operation. “It’s unfortunate for the BOK, but if we don’t give a signal in advance through a base rate hike, inflation expectations will rise and it could become more of a problem,” he said.

The reason Governor Lee emphasized the rate hike by adding an editorial stating ‘even if not popular’ was due to severe inflation. This is a reaffirmation of the austerity monetary policy stance at a time when the domestic price level soared to the 4% level in the aftermath of Russia’s invasion of Ukraine. Governor Lee judged that “inflation will continue to rise for at least one to two years in the future.” In the era of hyperinflation, how will the economy change and how to respond?

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