BOK to pay attention to economic growth in monetary policy this year

Rhee Chang-yong told a meeting with foreign correspondents in Seoul that the central bank will execute its monetary policy in a refined manner this year. [Photo by Joint Press Corps]

South Korea’s central bank will pay attention to economic growth and financial stability while maintaining its focus on inflation control in carrying out its monetary policy this year, its chief said Wednesday.

Rhee Chang-yong, governor of Bank of Korea (BOK), told a meeting with foreign correspondents in Seoul that the central bank will execute its monetary policy in a refined manner this year, considering economic growth and financial stability as inflation is expected to fall to the 3 percent level by the end of this year.

“Ensuring price stability was our main priority for last year due to high inflation going over 5 percent, but in the process of making monetary policy this year, we must carefully consider the trade-off with the economy and financial stability, while focusing on prices,” Rhee said.

This is the first time that the BOK governor has mentioned the balance between inflation and the economy after a series of aggressive rate hikes to fight inflation. Last week, the central bank raised the benchmark interest rate to 3.5 percent from 3.25 percent, the highest level since late 2008.

His remarks were interpreted by some market watchers as a signal that the BOK could pause its rate hiking cycle anytime soon to gauge the net effects of previous rate increases.

Rhee also emphasized the need to keep an eye on the local real estate market, which remains in the doldrums.

“Although household debt will not likely cause instability in the financial system in the short term, it is difficult to rule out the possibility of difficulties arising in the real estate sector,” he said.