Geosungbeom, Member of the Monetary Policy Committee, "Bank of Korea Should Communicate More Closely with the Government"

Korea Insurance Research Institute Seminar on 'The Impact and Challenges of the Insurance Industry in the Zero Interest Rate Era'

Accommodative Monetary and Fiscal Policies Expected to Continue for the Time Being
Despite Asset Price Surges Due to Low Interest Rates, Accommodative Monetary Policy Likely to Persist
Need to Coordinate Monetary and Fiscal Operations in Communication with the Government

Go Seung-beom, Member of the Monetary Policy Committee, Bank of Korea [Photo by Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] As definitive fiscal management is inevitably expected to continue for the time being to respond to the novel coronavirus infection (COVID-19), a Financial Monetary Policy Committee member of the Bank of Korea pointed out that harmonious fiscal management should be achieved through close communication between the Bank of Korea and the government. Although there has been a sharp rise in asset prices such as real estate and stocks due to the low interest rate trend, it is expected that the accommodative monetary policy will not be easily withdrawn.

Ko Seung-beom, a member of the Bank of Korea's Financial Monetary Policy Committee, said at the Korea Insurance Research Institute's seminar on "The Impact and Challenges of the Insurance Industry in the Zero Interest Rate Era" on the 16th, "Until last year, I expressed a 'hawkish (preference for monetary tightening)' view considering debt and financial stability situations, but as COVID-19 spread, I came to have the perspective that in a crisis situation, the crisis must be addressed first," adding, "Most monetary policy committee members share the same view."

Although the economic shock caused by COVID-19 has somewhat eased recently, the real economy is still sluggish, and employment conditions are not good, so most expect accommodative monetary and fiscal policies to continue for the time being. Ko said, "Not only in our country but also globally, expansive fiscal management is expected to continue for the time being," adding, "Therefore, the importance of harmonious operation between monetary policy and fiscal policy will further increase."

Explaining the harmony between monetary policy and fiscal policy, Ko mentioned the increase in government bond issuance and the part purchased by the central bank. He said, "Recently, the Bank of Korea announced that it would purchase government bonds worth 5 trillion won and is currently proceeding," adding, "Government bond issuance is expected to increase next year as well, and the Bank of Korea is closely monitoring the bond market and is prepared to respond whenever necessary."

Ko also said, "The U.S. Treasury and the Federal Reserve (Fed) communicate extensively and operate monetary and fiscal policies," adding, "This trend is the same not only for us but also for advanced countries." Although there are criticisms that independence might be lost if the government and the Bank of Korea communicate and issue and purchase government bonds, he said that in the future, rather, communication and aligning with policy directions will be required of the Bank of Korea. There will be increasing demands for monetary policy to be operated to alleviate the government's fiscal burden and stabilize financial markets.

Meanwhile, Ko acknowledged the financial-real economy gap caused by massive money supply after COVID-19 but believed that accommodative monetary policy would not be easily halted because of it. He said, "After COVID-19, major countries have seen asset prices surge following accommodative monetary policies, but no central bank has changed its monetary policy stance in response," introducing that the U.S. Federal Reserve (Fed), European Central Bank (ECB), Bank of England (BOE), Reserve Bank of Australia (RBA), and Bank of Japan (BOJ) are all maintaining accommodative monetary policies. The RBA recently lowered its policy rate further from 0.25% to 0.10%.

Additionally, Ko emphasized, "There are concerns about rising house prices, and while low interest rates have indeed influenced real estate, expectations of price increases and various government real estate policies are also affecting the situation."

This content was produced with the assistance of AI translation services.