Lee Chang-yong "Final interest rate at 3.5% or higher expected at Monetary Policy Committee... No signs of capital outflow"

Lee Chang-yong Holds Meeting with Accompanying Reporters in Washington DC
Current Expected Final Benchmark Interest Rate Is 3.5%
Some Monetary Policy Committee Members Consider Rates Above 3.5%
Regarding Korea-US Currency Swap: "Information Shared with Fed"

Bank of Korea Governor Lee Chang-yong is answering questions during a meeting with the accompanying press corps at the G20 Finance Ministers and Central Bank Governors Meeting and the International Monetary and Financial Committee (IMFC) meeting in Washington DC, USA, on the 15th (local time). (Photo by Accompanying Press Corps)

Lee Chang-yong, Governor of the Bank of Korea, stated, "There are no signs of capital outflow from our country yet," emphasizing that the current situation is not a crisis like in the past. However, he noted that domestic inflation could exceed 6% again depending on international oil prices, and some members of the Monetary Policy Committee believe the final benchmark interest rate should be above 3.5%, indicating a situation with significant uncertainty.

Governor Lee made these remarks on the 15th (local time) during a meeting with accompanying journalists at the G20 Finance Ministers and Central Bank Governors Meeting and the International Monetary and Financial Committee (IMFC) meeting in Washington DC, USA. He explained, "Because of the high uncertainty, we do not yet know how much the base rate will be raised at the November Monetary Policy Committee meeting, but the rate hike trend will continue," adding, "If things go as expected, the final level will be 3.5%."

He added, "Since it is a '3.5% level,' some members of the Monetary Policy Committee think it should be above 3.5%, while others think it should be below that."

Regarding domestic inflation trends, Governor Lee said, "If oil prices stabilize around the $90 level, inflation will peak in October, but the rate of decline afterward will not be fast." He also mentioned that if oil prices exceed $100 and inflationary pressures increase, the monthly inflation rate could again surpass 6%.

However, Governor Lee explained that the possibility of domestic capital outflow due to the sharp interest rate hikes in the United States is low. He said, "There are no signs of capital outflow from our country yet," adding, "From January to September, the amount of money taken out of our stock market by foreigners is less than half of the overseas investments made by our citizens. It is not a crisis like in the past."

Earlier, former U.S. Federal Reserve Chairman Ben Bernanke held a press conference on the 10th (local time) at the Brookings Institution in Washington DC, warning that the risk of capital outflow from emerging markets could worsen due to a stronger dollar, but Governor Lee indicated that there is no immediate risk for South Korea.

Regarding concerns that the foreign exchange authorities' large use of foreign exchange reserves to defend the exchange rate is increasing a sense of crisis, he said, "(Japan) defends the yen at around 140 yen, and they must have used at least twice the amount of foreign exchange reserves," emphasizing, "Our $400 billion in foreign exchange reserves is a sufficient amount, and no one overseas is worried about our country."

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 12th. Photo by Joint Press Corps

On the Korea-US currency swap agreement, he explained, "The Fed will decide at an appropriate time based on the global economic situation, and we are actively sharing information with the Fed in preparation for that."

Regarding President Yoon Suk-yeol's mention on the 13th of considering credit policies following the Bank of Korea's 'big step' (a 0.50 percentage point increase in the base rate), Governor Lee said, "Many people are struggling due to the rate hikes, so targeted support is the only option," adding, "If one side raises rates to control inflation while the other side loosens fiscal policy because of hardships, something like what happened in the UK will occur." He further explained, "Until inflation is controlled, fiscal and monetary policies should move in the same direction, and low-income and impoverished groups should fundamentally be supported by fiscal measures."

In response to a question suggesting that the large-scale tax cut policies promoted by the Yoon Suk-yeol administration could be a burden on low-income groups, he said, "The government's policy to reduce debt is very important in terms of credibility," adding, "Whether lowering corporate tax is regressive or progressive depends on whether one is conservative or progressive, but more importantly, we need to look at how the benefits generated from that are used."

He positively evaluated the government's decision to advance the implementation of the foreign national bond investment tax exemption policy, originally scheduled for next year, to start from the 17th of this month. Governor Lee said, "It is a very important situation whether domestic exporters, domestic companies, and domestic investors continue to go overseas or bring what is overseas back home," adding, "Although not immediately, it will help with the exchange rate and other factors."

Washington DC = Reporter Moon Je-won

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