ed Losing opportunity, again
To the disappointment of the business community, the Bank of Korea (BOK) kept the key interest rate on hold for another month. The central bank’s monetary committee said, “The global economy’s downside risks are huge, and Korea’s growth momentum is weak,” but freezed the policy rate at 3 percent for a second consecutive month.
The committee’s “unanimous” decision is not without reason. Korea may be able to wait out at least one more month without eased money supply, expecting the enormous injection of liquidity in both Europe and America to spill over to this heavily export-dependent economy. It also may be necessary to see how the government’s 5.9 trillion-won stimulus pans out.
We, like most others, want to accept the BOK’s move as a decision to save the final card to prepare for a worsened situation, but are more than a little leery because of the track record of the central bank under Governor Kim Choong-soo. There are at least two more reasons to reserve positive evaluation of the latest move: timing is everything in interest rate adjustment, and the BOK under Kim has almost always missed it.
Such uncertainty will become a reality, especially if the almost simultaneous series of stimulus, both here and abroad, prove to be mere measures that gain some time instead of turning the global recession around. Besides, any rate move should preempt markets’ trends, not follow them, not least because it takes at least six months for their effect to show.
But this is the same BOK that failed to increase rates even when the economy showed a “V-shape” recovery, losing opportunities to bring them back down amid the subsequent slump. The reason: Kim’s BOK was more mindful of economic growth than it was of combating inflation, the first and foremost duty of any central bank. In other words, Kim, the former chief economic secretary of President Lee Myung-bak, was watching politics more intently than the economy.
Little wonder, given the governor’s remarks upon taking office were that the central bank also should effectively be under the President’s control, giving up the central bank’s primary duty and limiting its own independence. This and other episodes have made the U.S.-based Global Finance include Kim in one of the “13 worst central bank heads.” Few will find it surprising if the BOK cuts the key rate toward the December election braving popular suspicion, as this governor has long ceased to care about such criticism.
Kim’s latest move itself is subject to mixed reviews. But the public’s trust, once lost, is hard to regain. And nowhere else is this more true than in monetary policy.