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Bank of Korea deputy chief: Monetary policy to be made 'very carefully'

Created at 21 Aug · 2:21 AM1 source↑ Market-relevant
IN SHORT

The new deputy chief of the Bank of Korea stated that monetary policy decisions will be made with great care and flexibility, considering economic growth, inflation, financial stability, and the side effects of rate hikes. He noted that economic growth is improving, but inflation remains above target, and financial stability risks persist.

Key Numbers

three-yearterm for Senior Deputy Governor Kwon Min-soo
seven-seatmonetary policy board
11-monthhighs for the won

Who's Involved

Kwon Min-soo
New Senior Deputy Governor of the Bank of Korea
Bank of Korea
South Korean central bank

↳ Why This Matters

The cautious tone from the Bank of Korea's deputy chief suggests a data-dependent and balanced approach to future monetary policy, signaling potential for measured rate adjustments rather than aggressive hikes, which could impact the South Korean won and broader economic outlook.

Key facts

  • Bank of Korea's new deputy chief, Kwon Min-soo, stated monetary policy will be made 'very carefully' and flexibly.
  • Decisions will consider economic growth, inflation, financial stability, and rate hike side effects.
  • Economic growth is improving, but inflation exceeds the bank's target.
  • Financial stability risks, foreign exchange volatility, and geopolitical risks are key policy factors.
  • The central bank previously raised interest rates for the first time in 3-1/2 years.
  • The won has strengthened significantly, which Kwon noted as a policy variable.

The new deputy chief of the Bank of Korea, Senior Deputy Governor Kwon Min-soo, indicated that monetary policy decisions will be approached with significant caution and flexibility. Speaking on his first day in the role, Kwon emphasized the need to carefully consider various factors, including economic growth, inflation, financial stability, and the potential side effects of interest rate hikes.

Kwon noted that while economic growth is showing stronger-than-expected improvement, inflation remains above the central bank's target, and risks to financial stability persist. He also highlighted foreign exchange volatility and geopolitical risks as important considerations for policy-making. The Bank of Korea had previously raised its benchmark interest rate for the first time in three and a half years, signaling further tightening to combat inflation.

When asked about his policy stance, Kwon stated that decisions would be data-dependent, avoiding a classification as either a hawk or a dove. He also commented on the won's recent sharp appreciation, noting it as a policy variable influenced by external factors, despite economic fundamentals suggesting further strengthening.

Frequently asked questions

Kwon Min-soo is the new Senior Deputy Governor of the Bank of Korea and a member of its seven-seat monetary policy board.

The bank sees economic growth improving more strongly than expected, but inflation is exceeding its target, and financial stability risks remain.

Monetary policy decisions will consider economic growth, inflation, financial stability, policy effects, side effects of rate hikes, foreign exchange volatility, and geopolitical risks.

The won has strengthened sharply since last month, trading around 11-month highs.

What Happens Next

01The Bank of Korea's next monetary policy meeting is scheduled for August 27.
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How It Developed

Senior Deputy Governor Kwon Min-soo began his three-year term at the Bank of Korea.
Kwon stated that monetary policy decisions would be made 'very carefully' and flexibly.
He emphasized considering economic growth, inflation, financial stability, and rate hike side effects.
Kwon noted economic growth is improving more strongly than expected.
Inflation is exceeding the bank's target, and financial stability risks remain.
Foreign exchange volatility and geopolitical risks were also cited as policy factors.
The Bank of Korea previously raised interest rates for the first time in 3-1/2 years.
Kwon indicated policy decisions would be data-dependent, not defining himself as a hawk or dove.

Sources

T1
Bank of Korea deputy chief says monetary policy to be made 'very carefully'Reuters

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