Federal Reserve Chair Kevin Warsh said he tracks South Korea’s economy for clues about technology supply flows to the United States, as stronger growth and high inflation complicate choices for the country’s central bank.
The Fed kept its target rate range at 3.75% to 4% on Oct. 28. Warsh said South Korea’s output and exports help him follow goods tied to the technology investment cycle and bound for U.S. markets. He described the economy as a clue to “what is on planes and ships coming this way.”
Bank of Korea (BOK) data published Oct. 27 showed real gross domestic product grew 1% in July-September. That was more than three times the bank’s earlier estimate of 0.3%. The Korea Herald reported that semiconductor exports and spending on production facilities drove the expansion. The outlet also reported real gross domestic income increased 18.8% from a year earlier, its fastest annual rise since 1977.
Consumer prices were 2.9% higher in September than a year earlier, above the BOK’s 2% target. The bank’s base rate is 3%. The Korea Herald reported that the difference between the Korean rate and the top of the Fed’s range is 1 percentage point.
The BOK raised rates in July and August. BOK Gov. Shin Hyun-song described the August move as “preemptive,” according to the Korea Herald. The outlet said the combination of rising prices and stronger-than-expected growth has left the central bank weighing inflation against economic activity.
October inflation data are a key indicator ahead. The Korea Herald reported that another rate increase is anticipated at the BOK’s Nov. 26 meeting and that signs of accelerating inflation in October could strengthen the case for a further hike.
