BOK chief stresses price stability, hinting at another rake hike in Jan.

2023. 1. 2. 12:48
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Bank of Korea Gov. Rhee Chang-yong [Photo by Park Hyung-ki]
Bank of Korea (BOK) Gov. Rhee Chang-yong on Sunday reiterated price stability a priority in 2023, hinting at another rate hike at the upcoming monetary policy decision due on Jan. 13.

“As inflation, which is most important to people’s livelihoods, is expected to stay above the target range, we will continue to focus on price stability in our monetary policy this year,” Rhee said in his New Year’s Day message.

He also emphasized the need to reduce heavy reliance on the Chinese economy, predicting this year will be a rough year with great uncertainty both inside and outside the Korean economy.

“In the process of responding to the realignment of global supply chains, it is necessary to reduce excessive dependence on the Chinese economy, including through market diversification,” Rhee said.

[Photo by MK DB]
China is Korea’s largest trading partner, accounting for 25 percent of Korea’s exports. China’s strict zero-Covid policy had cooled domestic demand and slowed its real estate market, taking a big toll on the Korean economy. In May, Korea posted its trade deficit with China for the first time since the two countries’ diplomatic relations were established. The overall trade balance was also in the red for eight consecutive months from April to November of last year.

Several other challenges lie ahead this year. China’s easing of Covid quarantine rules amid resurging new virus cases is increasing uncertainty while the war between Russia and Ukraine shows no sign of ending. The rapid contraction of the Korean real estate market in the aftermath of interest rate hikes could turn into a financial risk.

Rhee said that the process of coping with these crises should be used as an opportunity to resolve the structural problems of the Korean economy, such as dependence on trade with China and household debt.

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