South Korea's central-bank chief says inflation could stay around 5% through Q1 2023, warrants rate hikes

South Korea's new central bank governor Rhee Chang-yong speaks during his inauguration ceremony in Seoul, South Korea April 21, 2022. SeongJoon Cho/Pool via REUTERS

SEOUL, Oct 7 (Reuters) - South Korea's headline inflation is likely to stay around 5% through the first quarter of next year, which would warrant further increases in interest rates, central bank governor Rhee Chang-yong said on Friday.

"Inflation in the 5% range could continue through the first quarter of next year," Rhee said, responding to a question at a parliament session in Seoul, the capital.

"We look at supply and demand (inflationary pressures) but interest rates should increase should inflation stay above 5%."

Expectations are increasing among analysts for a 50 basis point hike in the key interest rate to 3.00% when the Bank of Korea reviews policy at its Oct. 12 meeting.

Rhee has kept the door open for a continued tightening through the first half of next year, and analysts have predicted the base rate would peak at 3.50% in the first quarter of 2023.

(This story has been corrected to fix headline, paragraphs 1, 2 to say first quarter, not first half, of 2023)

Reporting by Cynthia Kim; Editing by Simon Cameron-Moore

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