Bank of Korea Governor Lee Chang-yong: "Interest Rate Cuts Will Be Taken Slowly and Carefully"

74th Anniversary Commemorative Address of the Bank of Korea

"It may be time to reflect on the principle of 'Festina Lente (Make haste slowly),' which Emperor Augustus of Rome emphasized as the most important in policy decisions."

Lee Chang-yong, Governor of the Bank of Korea, made this remark on the 12th at the '74th Anniversary Ceremony' held at the Bank of Korea in Jung-gu, Seoul, stressing the need for a cautious shift in monetary policy stance.

The Governor said, "If inflation becomes unstable again after a premature shift to an easing stance, leading to a situation where interest rates must be raised again, the policy costs to be borne at that time will be much greater," and reiterated, "Until we are confident that inflation will converge to the target level, it is necessary to patiently maintain the current monetary tightening stance sufficiently."

He also stated, "If the policy stance is changed too late, it could cause market instability due to a weakening domestic demand recovery and a continued rise in delinquency rates," but added, "Conversely, if the policy stance is changed too early, the pace of inflation slowdown may be delayed, and there is a possibility of increased exchange rate volatility and household debt growth."

He continued, "Now that we have entered the final phase of the fight against inflation, delicate and balanced judgment considering these trade-offs is necessary," emphasizing the point.

Governor Lee also pointed out that the Bank of Korea must strive to solve structural problems in our society. He said, "We cannot confine our research area within the framework of monetary policy in the face of various structural problems that have accumulated and deepened over time, such as low birthrate and aging, regional imbalance and concentration in the Seoul metropolitan area, pension depletion and elderly poverty, education issues, income and asset inequality, and the dual structure of the labor market," adding, "In the current situation of a major social transformation due to the climate crisis and artificial intelligence (AI) innovation, sustainable growth of our economy cannot be expected without efforts to solve these structural problems."

He further emphasized, "This is exactly why the Bank of Korea must raise its voice not only on monetary policy but also on structural reforms, communicate closely with the government and related institutions, and become the country's top think tank."

He also expressed his determination to continue playing a role in proposing solutions to the structural reform tasks of our society. Governor Lee said, "There may be skeptical or critical views about the Bank of Korea, which has no legal authority, dealing with socially sensitive issues," but countered, "On the contrary, the Bank of Korea, free from such authority or vested interests, has the advantage of being able to analyze more neutrally and suggest solutions from a long-term perspective."

He reiterated the need for the Bank of Korea to become a "noisy Bank of Korea." The Governor said, "If we do not worry too much about responsibility when things go wrong, we can do more," and pointed out, "If we only avoid debates and criticism out of fear, we will always remain in the same place, and progressive change will be far off."

He added, "My aspiration since taking office has been to transform the Bank of Korea from a 'Bank of Korea Temple (Han-eun-sa)' into a 'Noisy Bank of Korea,' and I believe we are moving forward together toward that path," and said, "Now that we have entered the beginning of a new path, whether we move forward without hesitation or return to the old ways is ultimately our choice."

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