[New Year's Address] Lee Ju-yeol, Governor of the Bank of Korea, "Will Appropriately Adjust the Degree of Monetary Policy Easing"

Support for Small Business Owners and Self-Employed Continues
"Need to Consider Possibility of Prolonged Inflation"
Strengthening CBDC Research as Well

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] Lee Ju-yeol, Governor of the Bank of Korea, stated that the degree of monetary policy easing will be appropriately adjusted in line with improvements in the economic situation. As Governor Lee has hinted at interest rate hikes day after day, there is growing expectation that the Bank of Korea's Monetary Policy Committee will raise rates on the 14th. Additionally, he expressed the intention to respond promptly to any financial market instability that may arise during the normalization of monetary policies in various countries.

In his 2022 New Year's address released on the 31st, Governor Lee said, "The timing for further adjustments in the degree of easing should be determined by closely examining growth and inflation trends, while also considering the financial imbalance situation and the impact of changes in major countries' monetary policies." This implies that as the economy recovers, the process of normalizing interest rates should proceed accordingly.

However, he emphasized continued support for vulnerable groups. Governor Lee stated, "Selective support for vulnerable groups such as small business owners and self-employed individuals will be maintained for the time being, while improving the efficiency of support systems and simultaneously exploring mid- to long-term improvement plans to prepare for the post-COVID-19 situation."

Governor Lee also expressed concern about the recently high inflation trend. He added, "We need to carefully observe whether the interaction between inflation and inflation expectations could cause the inflationary trend to last longer than expected."

Plans are also in place to minimize market shocks resulting from the monetary policy directions of major central banks such as the U.S. Federal Reserve (Fed). Governor Lee emphasized, "Major central banks including the U.S. Fed have already started or announced interest rate hikes in response to increased inflationary pressures," and "there could be amplified volatility in price variables in international financial markets and capital flows." He added, "We must closely monitor risk factors and implement market stabilization measures promptly if necessary."

Regarding the introduction of Central Bank Digital Currency (CBDC), Governor Lee stated, "Technical and institutional research must be further strengthened," and "a system should be established to effectively monitor big tech companies providing new payment services to ensure the safety of payment and settlement systems."

Meanwhile, Governor Lee noted, "Digital transformation, the restructuring of global value chains, and the transition to a low-carbon economy may present significant challenges, but if the government and private sector combine their capabilities and respond wisely, these could become opportunities for a new leap forward."

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