South Korea's central bank may need to raise interest rates further, according to outgoing senior deputy governor Ryoo Sangdai, as strong economic growth pushes up underlying inflation. He noted, however, that the recent strength of the Korean won and stock market trends provide some policy flexibility.

Speaking at a press conference on Tuesday, he told reporters that the won's recent stability, combined with a decline in the benchmark Kospi index, "has given the Monetary Policy Board members some room to maneuver, but I don't think this is a key factor."

"The main issues are whether core inflation will remain elevated, whether the economy can sustain its growth momentum, and financial stability concerns," he added.

As one of the seven members of the Bank of Korea's Monetary Policy Board, Ryoo's term ends on August 20. He stated that the timing and pace of further rate increases should depend on upcoming data, adding that revised forecasts would ultimately determine the central bank's policy decision this month.

Ahead of the August 27 policy meeting, Ryoo's comments reinforce the central bank's tightening bias, as economic growth exceeds expectations and underlying inflation pressures persist. The Bank of Korea raised its benchmark rate by 0.25 percentage points to 2.75% in July, marking the first increase since early 2023.

South Korea's headline inflation fell to 2.8% last month, still above the central bank's target, while core inflation edged up to 2.6%. Some economists expect another rate hike this month following the July increase.