Bank of Korea to factor in employment status in rate policy

Employment status will become a decisive factor in South Korea’s monetary policy, which traditionally evolved around inflation and economic performance, said Lee Ju-yeol, governor of Bank of Korea (BOK).

In his New Year’s statement released on Thursday, Lee said that there has been increasing demand for the BOK to add employment stability to its mandate amid difficult times led by Covid-19.

“Monetary policy will factor in job stability for sustainable growth and improvement in livelihood, “ he said.

The bank will study researches at home and abroad to devise the suitable model for Korean monetary policy as aiming a number of “potentially contradicting” goals can undermine consistency and predictability of rate-setting policy, he added.

Lee was hopeful for a gradual recovery in the global economy and international trade next year as well as in the Korean economy, although challenges remained due to resurging Covid-19 and ongoing trade conflict between the world’s two-biggest economies.

There are also concerns over Korean economy’s overall “structural vulnerability,” he said, noting that low birthrate and aging society are restraining economic vitality. Covid-19 impact has also deepened imbalance between industries and income classes.

If the economy recovers in a K-shape where growth appears in some areas while others deteriorate, small businesses and low income class can suffer more.

Expansionary policies must be sustained to even out recovery.

But when the time comes, the bank would have to ready “normalization in the unprecedented loose policy.”

In the meantime, the central bank will stay accommodative of the economy and act “timely” if stabilization measures are called for the financial and foreign exchange markets.

[ㄏ Maeil Business Newspaper & mk.co.kr, All rights reserved]