The Bank of Korea put forward price stability as its major commitment for next year, hinting on further hikes of its key rate to fight ongoing inflation.

The central bank released a report on its monetary policy for next year on Friday, suggesting forecasts on the economic outlooks in and out Korea. The bank said it will focus on price stability next year, so that consumer inflation will move towards the target level, currently set at 2 percent.

“Although consumer inflation is expected to be in the mid-3 percent level next year, uncertainties remain high surrounding the projections for factors such as the extent of economic slowdown at home and abroad,” the report read.

According to the BOK, while the spike in the inflation rate is likely to continue throughout next year, the economic growth rate of 2023 will likely be lower than that of this year’s. Last month, the bank suggested the local economy to grow by 1.7 percent next year.

The economic growth rate will fall below expectations due to the global economic slowdown during the first half of next year, while domestic consumption recovery will struggle to pick up due to higher interest rates, the bank said.

However, the bank said “the sluggishness is expected to gradually ease from the second half of 2023 as external uncertainties diminish,” suggesting a brighter outlook for the second half of next year.

Nevertheless, the bank warned of high volatility for the finance and foreign exchange markets in 2023.

“Financial and foreign exchange markets could see heightened volatility for a considerable time as there are domestic and external risk factors,” the bank said, citing continued monetary tightening in major countries and credit-risk aversion in the real estate-related financial markets to the risks.

“There is a possibility that the instability in the related financial markets such as real estate project financing loans is likely to intensify again if the slowdown in the real estate market turns out to be greater than expected,” it said.

The central bank vowed to step up its monitoring of financial and foreign exchange markets and the overall financial system, implementing market stabilization measures when needed.