The nominee for Governor of the Bank of Korea, Shin Hyun-song, has issued warnings that surging oil prices and a weak Korean won could elevate inflation while simultaneously hampering economic growth. This highlights the policy challenges likely to confront him at the start of his term.

During a parliamentary confirmation hearing held on Wednesday, Shin stated that external uncertainties remain elevated. He identified persistent tensions in the Middle East, rising global energy prices, and shifts in the policy direction of major economies as key risks. "Geopolitical tensions in the Middle East remain severe, and global oil prices are still significantly higher than pre-war levels," Shin told lawmakers. "Risks also persist in the global trade environment and the monetary and fiscal policies of major economies." He added, "Consequently, upward pressure on inflation and downward pressure on growth for the domestic economy are increasing."

He suggested that the relatively controlled price pressures observed in March could intensify as the effects of high oil prices and a weak exchange rate permeate the economy. Meanwhile, although strong semiconductor demand and a supplementary budget offer some support, economic growth is expected to fall short of earlier projections.

According to a report released by the Bank of Korea earlier the same day, import prices surged 16.1% month-on-month in March, influenced by soaring oil prices, marking the largest increase in nearly three decades.

Despite these concerns, Shin downplayed the likelihood of stagflation. He noted that while inflation is bound to rise and growth may slow, the risk of a prolonged period of economic stagnation coupled with high inflation remains limited.

He also cautioned against excessive volatility in the exchange rate, stating that sharp or disorderly fluctuations in the Korean won are undesirable. "Amid heightened uncertainty in economic conditions, I will conduct monetary policy in a way that fulfills the Bank of Korea's core mandates of ensuring price and financial stability, while also supporting stable economic growth," Shin said.

Responding to market perceptions labeling him a "pragmatic hawk," he expressed disagreement with such characterization, adding that this binary labeling is inappropriate. Shin stated that, if appointed, he would implement monetary policy flexibly to balance price stability against financial risks, while maintaining coordination with the fiscal authorities without compromising the central bank's independence.