Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Bank of Korea confirms plans to adjust monetary policy
Bank of Korea Governor Lee Ju-yeol speaks during an online press conference at its headquarters in Seoul, Dec. 16. Courtesy of Bank of Korea
By Lee Min-hyung
By Lee Min-hyung
The Bank of Korea (BOK) will adjust the level of its monetary easing in accordance with the pace of economic recovery here in 2022, BOK Governor Lee Ju-yeol said Friday in a New Year's address.
“We will decide the timeline of additional adjustments in monetary easing after thoroughly monitoring economic growth and prices here,” Lee said. “The central bank will in particular placed the bank's priority on assessing the possibility of longer-than-expected inflation.”
Starting from the second half of 2021, the BOK hasn't changed its position in terms of the reiteration of its willingness preemptively to enter a cycle of monetary tightening amid the escalating inflationary pressure and widening financial imbalance here.
The central bank highlighted the need to do so despite the continued spread of the Delta variant and the rapid emergence of the Omicron variant here and abroad, at a time when developed economies are sending signals for the necessity of an increase in their benchmark rates, next year. The U.S. Federal Reserve is also set to end its dovish monetary policy by March, planning to finish its tapering program until then.
“There have been persisting concerns that inflationary pressure will continue longer than expected, mostly because of the continued and prolonged global supply (chain) disruption, and this kind of uncertainty has been pushing countries across the globe to speed up their monetary policy normalization,” said the governor.
But the central bank chief expected that the Korean economy, Asia's fourth-largest, to remain quite resilient in terms of keeping the momentum of its economic growth trajectory throughout next year, powered by the growth of exports and facility investment. In the meantime, the BOK expressed concerns over weakening domestic consumption amid toughened social distancing measures here.
“For such reasons, the economy will continue to face uncertainties, despite the hopes for robust exports and investment,” Governer Lee concluded. “We have already increased the key rates twice, and put an end to temporary financial support measures in phases,” he said. “But we strengthened loan support for those in need of capital, such as the pandemic-hit self-employed.”
After increasing its benchmark rate in August, for the first time since the pandemic began in early 2020, the central bank is set to increase it further to 1.25 percent, possibly by the end of the first quarter of 2022.