Inflation Fighter Bowing Out
By Cho Jae-hyon
Staff Reporter
Is Bank of Korea Governor Lee Seong-tae a "hawk" when it comes to inflation?
The general market perception is that he prioritized the fight against inflation over economic growth and resisted government calls for expansionary monetary policies.
However, Lee, a "BOK man" for 42 years who is stepping down from the top central bank job at the end of March, doesn't think so.
In response to a remark by a participant in an economic consultation meeting that Lee has been categorized by the press as hawkish, he said, "The person I want to mimic most is the one who reacts small to a small thing and reacts big to a big thing. Monetary policy needs that kind of reaction and belief in monetary policy should be tuned into case by case."
Lee said he has not wanted to fight against the government during the last four years of his term.
"The political circle seems to be clashing too much. I never wanted to fight against the government and neither have I hoped to be seen as a hawk," Lee said. "I just tried to make appropriate reactions depending on market conditions."
The monthly consultation meeting with chiefs of major economic institutes Wednesday was the last of such events he presided over as BOK governor.
Looking back on his term, Lee said, "I did not know much so I tried not to open my mouth too often in order to keep others from figuring me out."
Lee was the only central bank governor who has been promoted to the top job from the No. 2 post. That's why he has been fully supported by all other BOK men.
Besides a hawk, Lee has also been known as a central banker who sticks to principles. In November 2004, Lee, then the No. 2 man at the BOK, was the only member of the central bank's rate-setting committee who opposed a rate reduction.
After taking the helm of the bank, he has carried through monetary policies on the firm belief that sustainable economic growth is impossible without price stability.
However, he has been criticized for having been too "dovish" in recent months, failing to take preemptive actions against inflation.
RBC Capital Market strategists recently called him a "hawk in a cage," meaning Lee's stance on inflation has been folded by the invisible pressure from the government that opposes a key rate hike.
Most market analysts agree that he helped stabilize the financial market with efficient monetary policies despite the global financial crisis.
For BOK insiders, he is one of best governors, especially because he has not bent on his principles on the central bank's independence from the government.
Lee is obviously concerned that the bank's independence might be undermined after he leaves.
As usual, his successor did not come from inside the bank. Kim Choong-soo, Korea's ambassador to the OECD and a former economic affairs secretary for President Lee Myung-bak, will take over. Kim played a role in drawing up growth-oriented policies for the President.
Kim is unlikely to be as hawkish as Lee. Nor is he likely to fight for the central bank's independence as vehemently.
Lee is well aware of the tough tasks facing the central bank.
Recalling the past four years, he said he has been happy as governor. But looking upon the years to come, he expressed concerns.
"There seem to be a lot of changes. I'm sorry for leaving big burdens on my juniors (at the BOK)," Lee said.
It's too early to fairly evaluate his achievements.
However, during his last press conference early this month, Lee himself summed up his past four years as governor with the short phrase: "(I'm) only human."