[Inside Chodong] Bank of Korea’s Communication Drive Led by Lee Changyong’s 'IMF-Style Meetings'

Lee Chang-yong, Governor of the Bank of Korea, is explaining the base interest rate hike at a press conference held at the Bank of Korea in Jung-gu, Seoul on the 26th. Photo by Joint Press Corps

[Asia Economy Reporter Seo So-jeong] "How exactly do you conduct a surveillance meeting?"

When Lee Chang-yong, Governor of the Bank of Korea, decided to hold IMF-style internal meetings starting this month, calls flooded in from former Bank of Korea financial professionals who had previously worked at the International Monetary Fund (IMF). The surveillance meeting is a format used at the IMF, Lee’s previous workplace, where members freely express and discuss their opinions on major economic issues every week. The influx of inquiries came from Bank of Korea staff who were not accustomed to this style of discussion culture.

A financial professional who had attended surveillance meetings at the IMF said, "It’s not easy to prepare because you have to briefly present your views and ideas and share opinions, but on the other hand, it’s an opportunity to effectively showcase your presence." He added, "You can learn a lot as accumulated knowledge is shared and intense debates take place." The Bank of Korea staff who participated in the IMF-style surveillance meeting, renamed the ‘Weekly Current Issues Forum’ as proposed by Governor Lee starting this month, also gave positive feedback. "We are not used to a culture where individuals openly express their thoughts, but surprisingly active discussions took place, which is encouraging," they said.

Governor Lee’s communication-focused changes were also evident at his first appearance at the Monetary Policy Committee after taking office. On the 26th, when the base interest rate was raised by 0.25 percentage points, the governor actively responded to financial market inquiries with his characteristic straightforward manner. When a reporter asked about the specific timeframe implied by the phrase "for the time being" in the monetary policy direction meeting’s resolution statement, "It is necessary to operate monetary policy with a focus on inflation for the time being," the governor gave a detailed answer of "several months."

At the end of the press conference, he delivered a key message, saying, "Given the current situation, the negative ripple effects of inflation are expected to outweigh growth, so it is important to respond proactively," clearly signaling that further rate hikes are likely. This was a departure from the ambiguous language used during former Governor Lee Ju-yeol’s tenure, such as "normalizing accommodative monetary policy at an appropriate time," opting instead for direct speech.

Communication efforts continued at the ‘Financial Council’ held for the first time since Governor Lee’s inauguration the day before. The Financial Council, convened for the first time in two years and six months since November 2019 due to COVID-19, saw Governor Lee unusually explain the reasons behind the base rate hike and directly brief the heads of the Korea Federation of Banks and ten major banks, drawing attention. This reflected the governor’s intention to explain the background of monetary policy decisions to the banking sector and hear about financial and economic issues.

Of course, there have been some trial-and-error moments. At a meeting with Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho on the 16th, Governor Lee made an unplanned remark that "a big step (a 0.5 percentage point hike at once) cannot be ruled out," causing financial markets to fluctuate wildly and resulting in a harsh initiation.

The governor’s remarks carry significant weight as they can immediately impact the market. This means that caution is required. As the governor himself said, the market will need an adjustment period to adapt to the changed communication style of the Bank of Korea governor, but the clear and specific way of conveying messages is positive in that it eliminates distorted interpretations and increases market predictability. At a time when global inflation is intensifying and major countries are fiercely competing in a monetary policy war over interest rate hikes, it is hoped that the Bank of Korea governor’s new communication-based initiatives will evolve into an effective policy mix.

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