Bank of Korea Governor Lee Ju-yeol finishes his term at the end of this month. Usually, the process to pick his successor would have already begun. However, this time around, the end of the central bank chief's term coincided with the presidential election, causing President Moon Jae-in to put off nominating the next BOK head until after the election. The meeting between President Moon and President-elect Yoon Suk-yeol is also delayed, making it realistically impossible to complete the appointment by March 31. The BOK governor's seat will likely remain vacant for the first time in history.
The current economic situation is quite stringent. With the COVID-19 pandemic still underway, the Russian invasion of Ukraine and the international community's economic sanctions on Russia are shaking up the global economy. In Korea, too, prices soared, and the exchange rate became unstable. The U.S. Federal Open Market Committee raised the benchmark interest rate by 0.25 percentage points last Wednesday, expecting the Federal Reserve to increase it at each of its six meetings this year. That will be an essential variable to consider when the BOK decides its monetary policy. There are many issues that the central bank needs to tackle cautiously, such as the snowballing total household debt and loans to self-employed people repeatedly rolled over due to COVID-19.
Moon and Yoon should meet as soon as possible to nominate the next BOK chief and hold a confirmation hearing. Legally, the incumbent president has the right to appoint the next chief. However, President Moon's postponement of the nomination expressed his intention to coordinate and respect his successor's will. The BOK governor is not a post for politicians. As stipulated in the Bank of Korea Act, the central bank's monetary and credit policies should be established neutrally and implemented independently.
It is crucial to appoint a person who can and will do so. Governor Lee was appointed by former President Park Geun-hye but served consecutive terms under the Moon administration. U.S. Federal Reserve Chair Jerome Powell also served four years by the appointment of former President Donald Trump and was reappointed by President Joe Biden. The focus should not be on who has the right to appoint but who is the best person for the crucial post.