BOK Keeps Key Rate Under Gov’t Observation

The Korea Times

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BOK Keeps Key Rate Under Gov’t Observation

Posted : 2010-01-08 18:47

Updated : 2010-01-08 18:47

By Kim Tae-gyu
Staff Reporter

The Bank of Korea (BOK) decided to keep its benchmark interest rate at the historic low 2 percent at its monthly Monetary Policy Committee meeting, Friday.

The meeting was supposed to gain little attention as experts widely expected the move but media attention was extremely high due to an unusual participant ― Vice Strategy and Finance Minister Hur Kyung-wook.

Hur is the first vice finance minister to attend a BOK rate-setting meeting in 11 years, despite strong concerns that his presence would give the impression that the government was trying to undermine the independence of the central bank.

"The chances were that the BOK would keep the benchmark rate at 2 percent even if Hur hadn't taken part in the meeting. But his presence made some feel the BOK decision was forced by the government," said a Seoul analyst.

"Next time, however, a dispute could arise because the BOK is projected to raise the rate in February or March. If it freezes it in the coming months, there will be more talk about pressure from bureaucrats," he said.

Hur had to jostle through an army of unionists at the BOK gate to attend the meeting, who chanted that the Lee Myung-bak administration was trying to "tame" the central bank and hurt its neutrality.

Contending his attendance was geared toward just deepening cooperation between the finance ministry and the BOK, Hur made it clear that he would be a part of future meetings.

"While experiencing the financial crisis, we learned that policy coordination was very significant. I am here in order to strengthen cooperation with the bank and that's it," Hur told reporters who swarmed around him ahead of the meeting.

"We have no intention to challenge the independence of the central bank at all as it is stipulated in the relevant law. At the same time, however, our right to speak at the BOK meeting is also legally guaranteed."

However, many are uncomfortable with the measure, including the main opposition Democratic Party (DP), which blasted Hur's attendance as an attempt to control the central bank.

"Under the stewardship of the previous two presidents, the nation made progress to wrap up the government-spearheaded economic system, which was responsible for the Asian currency crisis," DP Chairman Chung Se-kyun said.

"But the Lee administration is reviving the old system as demonstrated by Hur's move. It should step back immediately."

To make matters more complicated, the Financial Services Commission (FSC) said it might also take part in BOK gatherings when issues under the jurisdiction of the financial policymaker are discussed.

Both the finance ministry and the FSC have claimed that the benchmark rate should be kept at 2 percent for the time being because there still remain uncertainties ahead for the economy.

In contrast, the BOK has hinted it might raise the rate making some senior bureaucrats anxious.

voc200@koreatimes.co.kr

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