Lee Ju-yeol, BOK Governor: "Raising the Base Rate to 1.5% Is Not Tightening"

Lee Ju-yeol, Governor of the Bank of Korea, is striking the gavel at the Monetary Policy Committee plenary meeting on the direction of monetary policy for February 2022, held at the Bank of Korea in Jung-gu, Seoul, on the morning of the 24th. (Photo by Bank of Korea) [Image source=Yonhap News]

Lee Ju-yeol, Governor of the Bank of Korea, said on the 24th that the inflationary trend is expected to continue for a considerable period, and even if the base interest rate is raised once more to 1.5%, it would still be considered accommodative.

At a press conference held immediately after the Monetary Policy Committee meeting at the Bank of Korea in Jung-gu, Seoul, on the 24th, Governor Lee explained, "The majority opinion of the Monetary Policy Committee is that the degree of monetary policy accommodation should be continuously and steadily reduced," adding, "Raising the rate once more cannot be seen as tightening."

Although the Bank of Korea's Monetary Policy Committee decided to keep the base interest rate steady at 1.25% on that day, this is interpreted as implying that additional hikes are inevitable in the future.

Governor Lee explained the background of the freeze, saying, "Since we have proactively adjusted rates three times so far, at this point, it is necessary to further examine changes in external conditions such as the monetary policy directions of major countries and geopolitical risks, and their impact on the domestic economy."

He said, "The current high inflationary trend is expected to continue for a considerable period, and the need to reduce financial imbalance risks remains," adding, "It is considered desirable to continue appropriately adjusting the degree of (monetary policy) accommodation."

In particular, Governor Lee evaluated the market expectation that the year-end base interest rate will reach between 1.75% and 2.0%, saying, "I think such market expectations are based on reasonable economic forecasts."

When asked whether the base interest rate hikes could be expanded as the Bank of Korea significantly raised its inflation forecast for this year to 3.1%, Governor Lee said, "In principle, if the inflationary trend rises, the degree of real accommodation expands, and the need for response can be said to have increased compared to before," but added, "Monetary policy decisions are not based solely on inflation."

He said, "I believe there is not a significant difference between what the market expects and what we see in terms of growth, inflation, and external conditions," adding, "I think the market's expectations are realizing reasonable economic forecasts."

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