Finance minister, central bank chief see eye to eye on policy coordination

Finance Minister Choo Kyung-ho, left, shakes hands with Bank of Korea Governor Rhee Chang-yong during a meeting in Seoul, May 16.

Korea's finance minister and its central bank chief stressed the need for close policy coordination Monday as the country's economy faces heightened uncertainty amid high inflation.

Finance Minister Choo Kyung-ho and Bank of Korea (BOK) Governor Rhee Chang-yong held a meeting to discuss ways to stabilize inflation, financial market volatility and policy coordination.

"The Korean economy is in a grave situation. As policy tools are quite limited, I think the government and the central bank need to communicate to provide a good policy mix," Choo said at the start of the meeting.

Rhee made similar remarks, saying the need to harmonize fiscal and monetary policies has increased more than ever.

Last week, the finance ministry proposed a record extra budget of 59.4 trillion won ($46.3 billion) in the latest move to compensate pandemic-hit merchants for their losses caused by strict COVID-19 curbs.

Critics said the extra budget was not in sync with the central bank's monetary tightening drive as the move could stoke inflation.

In April, the BOK raised its key policy rate by a quarter percentage point to 1.5 percent, the fourth rate hike since August last year, in a bid to tame inflation and curb household debt. Market players forecast the central bank to further hike borrowing costs at its May 26 policy meeting.

Korea's consumer prices grew at the fastest pace in more than 13 years in April amid soaring fuel costs and the economic recovery. Consumer prices spiked 4.8 percent year-on-year in April, a rise from the 4.1 percent gain seen in March. (Yonhap)

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