Lee Chang-yong "Situation Changed Since April"... Suggests Reconsidering Interest Rate Cut

Lee Chang-yong, Governor of the Bank of Korea, "April inflation data unlikely to serve as basis for May inflation data"
US interest rate cut delay, South Korea's Q1 growth rate, and geopolitical risks have changed
"Annual growth rate revision for South Korea inevitable"

(Photo by Bank of Korea)

Lee Chang-yong, Governor of the Bank of Korea, stated, "The situation has changed significantly since the April Monetary Policy Meeting (MPM)," adding, "The April MPM cannot serve as the basis for the May MPM."

On the 2nd (local time), during his visit to the Asian Development Bank (ADB) Annual Meeting in Tbilisi, Georgia, Governor Lee held a press conference with domestic reporters, emphasizing that three major factors have changed significantly since the April MPM: ▲ Delay in changes to U.S. monetary policy ▲ Better-than-expected economic indicators ▲ Increased volatility in oil prices and exchange rates due to geopolitical risks.

Regarding the delay in changes to U.S. monetary policy, Governor Lee explained, "As U.S. economic data has come out positively, the expected timing for rate cuts has been pushed back," adding, "What the world is currently thinking is that the timing for U.S. rate cuts has been delayed compared to the original expectation, considering the robust U.S. economy and inflation levels."

On the first-quarter domestic economic indicators, he said, "We expected exports to perform well, but domestic demand turned out to be stronger than we (the Bank of Korea) anticipated," adding, "The degree of difference was larger than expected, so from the Bank of Korea’s perspective, it is time to review what we missed in our previous forecasts and whether the impact of what we missed is temporary or will last longer."

Regarding the volatility in oil prices and exchange rates caused by geopolitical tensions such as the Middle East situation after the April MPM, he expressed concern, saying, "There is great uncertainty about how stable these will be going forward."

He continued, "It is difficult to comment on future actions under the current circumstances," adding, "After returning to Korea, I will communicate with the Monetary Policy Committee members to assess how this might affect future monetary policy, and I expect to provide more detailed remarks at the May MPM."

On South Korea’s first-quarter Gross Domestic Product (GDP) growth rate, he said, "There was a significant difference from our (Bank of Korea’s) forecast, so we are reviewing where the difference occurred," adding, "Even looking at GDP, domestic demand turned out better than expected, but the exact reasons can only be known after analyzing the data reviewed by our staff."

However, he stated that an upward revision of the annual growth rate is inevitable. Governor Lee emphasized, "Last year’s growth rate was low at 1.4%, but the growth achieved last year was realized in the first quarter of this year," adding, "Technically, we cannot avoid revising the GDP growth rate upward."

Meanwhile, he also mentioned the newly appointed Monetary Policy Committee members joining this month, Kim Jong-hwa and Lee Soo-hyung. Governor Lee said, "Commissioner Kim Jong-hwa has been with the Bank of Korea for a very long time, has a gentle personality, and is a cooperative style, so I think I will have to learn as I work with him for the first time."

Regarding Commissioner Lee Soo-hyung, he said, "Professor Lee Soo-hyung was my former student," adding, "I know him very well." He continued, "What I expect is that Professor Lee Soo-hyung will bring not only expertise in monetary policy but also academic tools and the willingness to analyze various institutional issues, structural reforms, and institutional matters that we (the Bank of Korea) are working on," concluding, "He will be a very valuable asset."

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