Lee Chang-yong "Economic Policy Frame Led by Private Sector... Concerned More About Inflation Than Current Growth"

Bank of Korea Governor's First Press Meeting Since Inauguration

Lee Chang-yong, the new Governor of the Bank of Korea, is meeting with reporters at the Bank of Korea briefing room on Sejong-daero, Jung-gu, Seoul, on the 25th. / Photo by Joint Press Corps

[Asia Economy Reporter Seo So-jeong] Lee Chang-yong, the new governor of the Bank of Korea, proposed that in order for the Korean economy to sustain growth, the economic policy framework led by the government should be shifted to one led by the private sector. Regarding the direction of monetary policy decisions in May and July, he stated, "So far, inflation has been generally more concerning," and expressed that decisions will be made based on data and observing the actions of the U.S. Federal Open Market Committee (FOMC) in May.

At a meeting with reporters covering the Bank of Korea on the 25th, Governor Lee said, "When the Korean economy was simple and uncomplicated, the government led all industrial policies, but times have changed." He added, "Korea achieved rapid economic growth in the past, so government-led growth was effective, which has created nostalgia and trust in that approach. However, at this point, a 'new frame' is needed that clearly distinguishes what the government can do, what it cannot, and what actions might cause adverse effects."

Using the Bank of Korea as an example, Governor Lee said, "There are lawmakers suggesting that employment stability should be included as a policy goal of the Bank of Korea. If it means stabilizing employment amid economic fluctuations, it is acceptable to include it as a goal. However, if it means 'job creation' or 'maximizing employment,' that is beyond our capacity and should be done by the private sector. If the government tries to do this, it will cause many side effects and is not sustainable," expressing his conviction.

He also pointed out the need to improve the fact that a significant portion of Korea's policies are decided from the supplier's perspective. Governor Lee said, "When making policies, I think we should not only focus on suppliers but also ask to what extent it contributes to the convenience of consumers and strive for balance." He mentioned, "If it is deregulation, we can examine whether it is for the convenience of existing companies in the market or to enable new companies to operate businesses that benefit consumers." He cited the cases of ride-sharing services 'Tada' and 'Uber,' which were unable to operate properly due to domestic regulatory barriers. Governor Lee expressed regret, saying, "If suppliers are harmed by the introduction of systems like Tada and Uber, even if compensation is provided, policies should consider the consumers."

Lee Chang-yong, the new Governor of the Bank of Korea, is meeting with reporters at the Bank of Korea briefing room on Sejong-daero, Jung-gu, Seoul, on the 25th. / Photo by Joint Press Corps

He also revealed his views on the process of resolving polarization. Governor Lee said, "I believe that policies aimed at resolving polarization should prioritize protecting the vulnerable 30% above all else," and criticized, "If policies target the middle class and are politically popular but ultimately fail to protect the vulnerable and only distribute benefits marginally, such policies are ineffective."

Regarding criticisms that his emphasis on economic structural reform in his inaugural speech might be an overreach into the domains of other ministries such as the Ministry of Economy and Finance, he explained, "In the short term, since fiscal policy and other ministries have different responsibilities, it is natural to respect that and coordinate to avoid disagreements." However, he added, "Even if a ship tilts by one degree, no matter how hard you work on it, there is a risk of reaching the wrong destination. Since the Bank of Korea has the major mission of stabilizing the national economy, I believe it is the Bank's role to check whether the ship's angle is correct."

Regarding the future direction of interest rates, he said, "Both inflation and growth slowdown are concerns, but so far, inflation has been generally more worrisome." He added, "The normalization of monetary policy will continue, but the pace at which the base rate will be raised will be discussed with Monetary Policy Board members after reviewing the data." He also noted, "With the easing of social distancing, consumption may increase, and we need to observe how growth will unfold." He emphasized, "The U.S. FOMC meeting is a major variable for the May Monetary Policy Board decision. The Fed may raise the base rate by 0.50 percentage points or more, and we also need to monitor capital inflows and outflows and exchange rate movements thereafter."

Regarding the exchange rate, he evaluated, "The degree of won depreciation in January and February is similar to the rise in the dollar index," and said, "The won's depreciation is not severe compared to other currencies like the yen." He added, "We will observe the impact of exchange rate movements on inflation, but it is not desirable to set interest rates targeting the exchange rate."

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