SEOUL (Reuters – South Korea’s chief central banker reiterated Wednesday that the bank must raise its policy interest rate to combat red-hot inflation in a world where uncertainty is rising due to the Ukraine crisis.

As Governor Lee Juyeol finished his eight-year tenure at the Bank of Korea, he stated in a speech that because high inflation is expected to persist “for a substantial period” and there was a need for financial balances to be reduced, it was “necessary to continue reducing the level of monetary easing”.

Lee, who presided over the rate decision meetings at 76 in all, will end his term March 31. He will now be replaced by Rhee Chan-yong (a veteran technocrat with the International Monetary Fund).

After back-to-back increases on coronavirus infections and rising tensions in Ukraine, the BOK kept its base rate at 1.25%.

Lee stated that expectations for more rate increases by the bank, to approximately 1.75% to 2.00%, were reasonable. He also said there was an even greater need to take policy measures to stabilize prices.

The bank raised its inflation projections by 3.1% to 2.0% in February. However, it maintained its 3.0% growth forecast.

Lee said that Wednesday’s BOK February forecast didn’t include Russia’s invasion of Ukraine. He indicated that an update may come later.

Lee stated to reporters that Russia invaded Ukraine shortly after our last meeting. The economic situation has worsened over the years.

Lee said that while we will continue to watch the Russia-Ukraine conflict and its effects, it is certain that we are concerned that Russia-Ukraine’s war could bring about much greater inflationary pressure and increase strains on growth.

Russia describes its actions in Ukraine as a “specially military operation”.