‘Cheong Wa Dae's comment on interest rate inappropriate'
By Nam Hyun-woo
The finance minister and central bank governor both said Wednesday they would employ "staunch measures" to stabilize the financial market against risks involving North Korea.
In a luncheon at Korea Federation of Banks headquarters in Seoul, Minister of Strategy and Finance Kim Dong-yeon and Bank of Korea (BOK) Governor Lee Ju-yeol said they are setting up contingencies based on various scenarios.
"The heightened geopolitical risks regarding North Korea left financial markets volatile both here and abroad," Lee said.
"Though it is recovering this week, there remains the possibility of instability depending on how the situation develops."
Kim said the government and the BOK will cooperate for market stabilization and take all necessary measures.
"We are closely monitoring the market and the BOK is cooperating with us," Kim said. "Though it is inappropriate to disclose details of the measures, I can say we are coming up with plans based on various scenarios."
The meeting came after Kim requested a luncheon with Lee earlier this week. The request was made amid the escalated tension on the Korean Peninsula as the North and the U.S. exchanged bellicose rhetoric over Pyongyang's intercontinental ballistic missile tests and the United Nations sanctions that followed.
During the meeting, Kim and Lee also discussed the global market situation and domestic economic issues, including the government's expanded role in fiscal policy, Korea's soaring household debt and real estate prices.
Lee and Kim said they believe in the importance of fiscal policy in addressing the Korean economy's structural weakness.
"There are some doubts about the government's fiscal prudence regarding the 178 trillion won ($156.2 billion) policy roadmap. The government expects there will be 15 trillion won of extra tax revenue this year and it seems to have no problem in garnering resources for the roadmap," Kim said.
Regarding Korea's household debt, they said the BOK, the finance ministry and other financial authorities are making a comprehensive plan to contain the soaring debt and are in the process of setting the date.
The country's 1,400 trillion won household debt has been cited as one of the grounds for presidential economic adviser Kim Hyun-chul's criticisms of the BOK's low interest rate policy.
In an interview, the adviser said "the previous administration's low interest rate policy has failed and the current 1.25 percent key rate is too low." The central bank has been keeping its key rate at the record-low level for 13 straight months.
After the remark, the short-term interest rate has spiked up, expanding volatility in the bond market.
"As I stressed before, setting the rate is the exclusive authority of the BOK and a government official's comment on this is inappropriate," Kim said. "A comment itself will hamper the independence of the central bank."
Lee said he fully agrees with Kim.
This is the second meeting between the BOK governor and finance minister since Kim's inauguration in June.
By Nam Hyun-woo
The finance minister and central bank governor both said Wednesday they would employ "staunch measures" to stabilize the financial market against risks involving North Korea.
In a luncheon at Korea Federation of Banks headquarters in Seoul, Minister of Strategy and Finance Kim Dong-yeon and Bank of Korea (BOK) Governor Lee Ju-yeol said they are setting up contingencies based on various scenarios.
"The heightened geopolitical risks regarding North Korea left financial markets volatile both here and abroad," Lee said.
"Though it is recovering this week, there remains the possibility of instability depending on how the situation develops."
Kim said the government and the BOK will cooperate for market stabilization and take all necessary measures.
"We are closely monitoring the market and the BOK is cooperating with us," Kim said. "Though it is inappropriate to disclose details of the measures, I can say we are coming up with plans based on various scenarios."
The meeting came after Kim requested a luncheon with Lee earlier this week. The request was made amid the escalated tension on the Korean Peninsula as the North and the U.S. exchanged bellicose rhetoric over Pyongyang's intercontinental ballistic missile tests and the United Nations sanctions that followed.
During the meeting, Kim and Lee also discussed the global market situation and domestic economic issues, including the government's expanded role in fiscal policy, Korea's soaring household debt and real estate prices.
Lee and Kim said they believe in the importance of fiscal policy in addressing the Korean economy's structural weakness.
"There are some doubts about the government's fiscal prudence regarding the 178 trillion won ($156.2 billion) policy roadmap. The government expects there will be 15 trillion won of extra tax revenue this year and it seems to have no problem in garnering resources for the roadmap," Kim said.
Regarding Korea's household debt, they said the BOK, the finance ministry and other financial authorities are making a comprehensive plan to contain the soaring debt and are in the process of setting the date.
The country's 1,400 trillion won household debt has been cited as one of the grounds for presidential economic adviser Kim Hyun-chul's criticisms of the BOK's low interest rate policy.
In an interview, the adviser said "the previous administration's low interest rate policy has failed and the current 1.25 percent key rate is too low." The central bank has been keeping its key rate at the record-low level for 13 straight months.
After the remark, the short-term interest rate has spiked up, expanding volatility in the bond market.
"As I stressed before, setting the rate is the exclusive authority of the BOK and a government official's comment on this is inappropriate," Kim said. "A comment itself will hamper the independence of the central bank."
Lee said he fully agrees with Kim.
This is the second meeting between the BOK governor and finance minister since Kim's inauguration in June.
