SEOUL– Some policymakers of the Bank of Korea (BOK) voiced concerns that a sharp rate hike could excessively cool the economy when they gathered to determine the trajectory of the central bank’s monetary policy, minutes of their October meeting showed Tuesday.

They also called for a less aggressive increase in borrowing costs, worrying that the export-driven Korean economy could come under growing pressure from a global recession that could materialize down the road, according to the minutes.

At the meeting held on Oct. 12, the BOK’s seven-member monetary policy board lifted its key policy rate by 0.5 percentage point to 3 percent, the second-ever big-step increase and the eighth rise in the cost of borrowing since August last year in the face of rising inflation pressure.

The decision was not unanimous with two board members calling for a quarter percentage point hike.

“In consideration of the overall upward movement of inflation, it is desirable to maintain monetary policy tightening but I think it would be appropriate that it should be done so in a way that is not excessive,” an unnamed member was quoted as saying.

“Given that there is a time gap for monetary policy to show its impact, those policy rate increases will gradually affect the real economy. And our small and open economy will also be affected by the global economy that is expected to go into the phase of a recession next year,” the member said.

The member added that the country’s job market remains robust right now but the pace of job creation will likely slow down in the coming months due to worsening economic conditions.

Another member, who called for a quarter percentage increase, expressed worries over slowing exports and corporate investment along with expectations that consumption will not likely continue to grow given high inflation and high borrowing costs.

The member also shared the concerns over the weakening local currency and the widening reversal in rates between South Korea and the U.S. that could prompt investors to leave in pursuit of higher returns.

“But it is still necessary to sufficiently recognize and brace for the possibility that increasing rates for the sake of stabilizing the foreign exchange market could speed up the pace of the domestic economy’s downward move and cause financial instability in the process,” the member said.

Source: Yonhap News Agency