Finance ministry pledges to tame inflation, financial imbalance

Leaders of Korea's financial authorities pose before holding a macroeconomic meeting at the Korea Federation of Banks' headquarters in Seoul, Friday. From right are Financial Supervisory Service Governor Jeong Eun-bo, Finance Minister Hong Nam-ki, Bank of Korea Governor Lee Ju-yeol and Financial Services Commission Vice Chairman Doh Kyu-sang. Joint Press Corps-Yonhap

By Lee Min-hyung

Korea's financial authorities will place its policy focus on taming inflation and the financial imbalance amid escalating economic uncertainties here and abroad, Finance Minister Hong Nam-ki said Friday.

“Prices here will be on the continuous rise in the first half of 2022, so we will focus on restricting core inflation and stabilizing price levels,” Hong said during a macroeconomic meeting. This meeting was the first time since the end of September that Hong and leaders of financial authorities ― such as Bank of Korea Governor Lee Ju-yeol and Financial Supervisory Service Governor Jeong Eun-bo ― have gathered to discuss their future policy stance.

Hong called for the need to maintain economic resilience and stabilize prices preemptively, as the Korean economy is still exposed to lingering risks amid the U.S. Fed's planned rate hikes and the unceasing spread of COVID-19.

“The economy continues its recovery momentum, but it is still vulnerable to external uncertainties amid widening market volatilities here and abroad,” he said.

The meeting was held at a critical time when the Fed is getting closer to ending its bond-buying campaign and raising its key rate as early as March. The Korean central bank is also widely expected to push for a couple of additional rate hikes no later than the end of this year, amid growing inflationary fears here.

The leaders of the watchdogs also said they would make a final decision on whether to extend financial support to the self-employed next month. Under the program, small business owners and the self-employed have been able to receive loans without paying interest and principal for more than a year since the outbreak of the coronavirus.

But authorities are in internal talks over whether to keep extending the support benefits to affected businesses. The banks and financial authorities are concerned whether those who receive them will be able to pay back the loans, even after the pandemic shock comes to an end. The banks and the Financial Services Commission are discussing measures on how to minimize potential financial shocks resulting from continued difficulties faced by the self-employed after the program ends.

Hong also discussed how the authorities will manage risks over external geopolitical uncertainties, including escalating tensions between the U.S. and China, and possible armed conflict in Ukraine.

“Such external risks are emerging as growing fear factors to the local economy, so we are going to make thorough preparations for the economy not to fall victim to any predictable set of risks here or abroad,” he said.