BOK chief says AI boom and Middle East conflict are combining to raise inflation
Bank of Korea Gov. Shin Hyun-song said the AI investment boom and Middle East conflict are combining to lift inflation, urging a focus on low-income households as South Korea faces a K-shaped economy.
Speaking at a CNN Global Perspectives session livestreamed online on the sidelines of the International Monetary Fund-World Bank Group annual meetings in Bangkok, Thailand, Shin said the two trends pull activity in opposite directions but join forces on inflation. “The AI economy is swamping the negative effect of the war in the Middle East. But in terms of inflation, and this is relevant for the central bank, they are actually combining to raise inflation,” he said.
South Korea is at the forefront of the global AI boom. Demand for AI computing infrastructure has fueled demand for memory chips, driving exports and profits at Samsung Electronics Co. and SK hynix Inc. to record highs, according to the report. Shin said the export-driven growth has not fully spread through the broader economy, leaving what he called “a pretty sharp case of a K-shaped economy.” He added that people in the lowest income group are hit hardest by inflation.
“I think the best thing from a central bank perspective is to just keep in mind that inflation hurts the lowest-income members of the population most,” Shin said. “So this is why we need to get inflation down, and getting monetary policy right is absolutely key.”
The Bank of Korea has tightened monetary policy as inflation remains above its 2 percent target. It raised its benchmark interest rate to 3 percent through consecutive hikes at its July and August meetings, describing the moves as “preemptive” measures to prevent inflationary pressures from accelerating further. The central bank will hold its next rate-setting meeting next week.
Editor's Summary
Bank of Korea Gov. Shin Hyun-song said the AI investment boom and Middle East conflict are together raising inflation, even as the AI economy outweighs the war’s drag on activity. He pointed to a K-shaped economy in South Korea, where chip exports are booming but low-income households bear the brunt of higher prices. The BOK has raised its policy rate to 3 percent and will meet next week as inflation stays above target.