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 to address need to tame inflation
Bank of Korea Governor Lee Ju-yeol speaks during a press conference at its headquarters in Seoul, Nov. 25. Yonhap
By Lee Min-hyung
By Lee Min-hyung
Bank of Korea (BOK) Governor Lee Ju-yeol will ramp up the rhetoric to combat inflation by reiterating his determination to again hike the central bank's key rate, during his upcoming year-end press conference.
The BOK's monetary policy board has repeated its hawkish gestures over the past few months, increasing the key rate in August and November. The central bank is moving to raise it once more sometime in January or February, addressing the need to get escalating inflationary concerns under tighter control.
But this raises woes because a set of preemptive rate hikes will come at the cost of some financially vulnerable groups, such as the self-employed and small business owners, hit hard by the pandemic. With Korea reporting 5,817 daily coronavirus infections for Monday, they are feared to continue falling victim to the pandemic shock.
Self-employed workers have been hit hard since the COVID-19 pandemic began in early 2020. With the government introducing a tight set of social distancing rules, most of them have been unable to operate their businesses normally, resulting in a steep fall in sales.
But with Korea adopting the “Living with COVID-19” strategy at the start of November, domestic consumption has shown signs of bouncing back, rekindling hopes that the self-employed may be able to return to business as usual and regain confidence in their businesses.
The optimistic outlook, however, has hit another snag due to the BOK's steep rate hikes, at a critical time when the pandemic fear has not come to a complete end due to the steeply rising infection cases and the outbreak of the Omicron variant of the coronavirus. This increases the likelihood of the government stepping up pressure on the BOK by urging it to slow down the rapid pace of its rate hikes.
Despite the reviving worries of a pandemic-sparked economic slowdown, Lee is expected to underscore the need for another rate hike during the upcoming meeting with reporters, by placing a priority on taming inflation, rather than speeding up the economic recovery with prolonged monetary easing.
This is in tandem with U.S. Federal Reserve Chairman Jerome Powell who said recently it is time for the Fed to stop using the word “transitory” when describing inflation due to prolonged inflationary fears there.
“The benchmark rate here is still at an accommodative level when considering the nation's GDP growth and price patterns,” Governor Lee told reporters late last month after increasing the BOK's key rate by 25 basis points to 1 percent.