(Bloomberg) — The Bank of Korea will continue to adjust policy in line with the economy’s recovery and keep an eye on the risk that high inflation lasts longer, Governor Lee Ju-yeol said in a speech marking the new year. 

Lee announced Friday that South Korean central banks will monitor growth, inflation, financial imbalances, and global changes in monetary policy in order to decide when they should lower accommodation after two rate hikes in 2021. 

“The economy will continue steady growth on the back of exports and investment, but uncertainties surrounding the economy remain high,” Lee said, according to a statement from the BOK. “With the emergence of the new variant, it’s difficult to gauge when the pandemic will end, and there are concerns that high inflation may last longer than expected due to supply disruptions and climate change polices.” 

Lee’s comments largely echoed the bank’s previous stance that rate hikes will continue into the new year, with the caveat that the pace and timing of any change will depend on how the pandemic affects the economy.  

Data released earlier Friday showed Korea’s inflation hovered near a decade high in December, underscoring persistent price pressures facing the economy. 

South Korea inflation exceeds 3% during the third month of December 

In Friday’s statement, Lee also expressed concern over excess debt buildup, an issue that has prompted the BOK to start reining in stimulus in 2021 earlier than most Asian peers.  

“Such weak links in the economy are exposed to risks when external situations deteriorates,” Lee said. “When uncertainties are high, like now, we should find our vulnerabilities and actively work to resolve them.”

Lee stated that capital flows and financial markets could be more volatile if global central banks normalize their policy. He called for prompt action to stabilize the markets. 

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