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(Bloomberg) — Financial institution of Korea Governor Rhee Chang-yong warned that the central financial institution’s warfare on inflation isn’t over regardless of indicators of cooling costs, saying it stays unsure whether or not the present coverage is tight sufficient.

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“We’re in a restrictive space,” Rhee advised Bloomberg TV’s Shery Ahn in Washington, referring to greater rates of interest. “Then again, I don’t need to give a message that this degree is restrictive sufficient to mechanically scale back inflation.”

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BOK’s Rhee on Financial institution Turmoil, Markets, Oil Costs (Video)

Whereas Korea’s shopper value positive aspects have slid to 4.2% from final 12 months’s peak of 6.3%, it stays double the BOK goal of two%. Components together with a deliberate OPEC+ manufacturing minimize and the Federal Reserve’s coverage might additional irritate value pressures, Rhee mentioned.

Nonetheless, the BOK held its key rate of interest for a second time in a row earlier this week, with the board’s unanimous resolution signaling a potential finish to its tightening cycle.

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A rising variety of analysts are betting that the BOK will begin reducing charges later this 12 months to spur progress because the economic system weakens amid an export hunch, property-market woes and cooling consumption.

It’s “nonetheless too untimely to make sure” in regards to the path of inflation, a lot much less a possible easing, Rhee mentioned. Slightly, the choice to carry in latest months displays the BOK’s willingness to evaluate the affect on costs from its 18-month tightening cycle, he mentioned.

The BOK’s resolution to go away charges unchanged provides to proof that central banks globally are reaching an inflection level of their battle towards inflation. Policymakers are more and more cautious of aggravating the economic system with greater borrowing prices, which may gradual demand and funky costs but additionally threat triggering a recession.

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In South Korea, falling exports have weighed on manufacturing and threaten to additional erode investor confidence within the economic system’s progress prospects. Consumption has additionally weakened as greater costs chew into spending. On the identical time, default dangers are rising amongst builders because the housing market slumps due to greater borrowing prices. 

At a press convention following the speed resolution, Rhee doused expectations for an early return to decrease charges, saying it was inappropriate to speak a few fee minimize earlier than getting a transparent sign that inflation was cooling to the two% goal.

Just one board member sees the present rate of interest setting of three.5% as a positive terminal fee, Rhee mentioned Tuesday. 5 board members need to hold the door open to a better fee, he mentioned, with out disclosing his personal view.

Any suggestion from the central financial institution a few potential fee minimize dangers additional weakening the received. The forex is Asia’s worst performer up to now this 12 months, a decline that has added to strains on an economic system that depends closely on imports for meals and power.

The BOK has been monitoring the affect from the collapse of Silicon Valley Financial institution and Credit score Suisse, although policymakers see restricted affect on Korea.

Rhee can be scheduled to talk Friday on a panel in Washington through the Worldwide Financial Fund’s spring conferences.