Presidential Office "Regret Over Interest Rate Freeze" vs. Bank of Korea "Various Interpretations Possible"

Yongsan, Unusual Disagreement in Monetary Policy Decision
BOK: "Monetary Policy Committee Members Judge Based on Indicators"

The Presidential Office stated on the 22nd that although the decision on the base interest rate is the exclusive authority of the Monetary Policy Committee of the Bank of Korea, there is some regret from the perspective of stimulating domestic demand, as the Bank of Korea kept the base interest rate at 3.50%.

A Presidential Office official said in a conversation with Asia Economy on the same day, "The decision on the interest rate is the exclusive authority of the Monetary Policy Committee," adding, "However, given the recent continued sluggishness in domestic demand and the government's position to revive consumption, there is regret that the interest rate was kept unchanged."

The Presidential Office's unusual expression of dissent regarding the monetary policy decision is interpreted as fully recognizing that the base interest rate decision is the exclusive authority of the Monetary Policy Committee, but actively emphasizing the need for a rate cut amid ongoing difficulties faced by small and medium-sized enterprises, small business owners, and vulnerable groups ahead of the Chuseok holiday.

A Presidential Office official said, "The Bank of Korea lowered its forecast for this year's real Gross Domestic Product (GDP) growth rate from 2.5% to 2.4%, which can be one of the grounds for a rate cut," adding, "The government plans to prepare and announce measures to stabilize livelihoods, including the supply of Chuseok holiday seasonal goods, and consumption stimulation measures next week."

Bank of Korea Governor Lee Chang-yong is speaking at the monetary policy direction press conference held at the Bank of Korea in Jung-gu, Seoul, on the morning of the 22nd.
[Image source=Yonhap News]

The Bank of Korea's Monetary Policy Committee held a monetary policy meeting on the same day and unanimously decided to keep the base interest rate at the current level of 3.50% per annum. This marks the 13th consecutive freeze since February last year. This is the longest freeze in the history of the Bank of Korea since its establishment.

While the Presidential Office directly expressed regret over the monetary policy decision, the Bank of Korea is avoiding a direct response on this matter. At the Monetary Policy Committee press conference on the same day, Governor Lee Chang-yong of the Bank of Korea said in response to a question about the Presidential Office's regret over the rate freeze decision, "I think various interpretations are possible depending on which aspect you look at in the current situation," adding, "Therefore, it is natural that many institutions and media evaluate us with different opinions given the current situation."

Governor Lee continued, "The Bank of Korea listens to all such views and makes decisions through internal discussions," adding, "The Monetary Policy Committee will judge various upcoming indicators and decide on whether to cut rates in October, and it may also decide in November, so it is difficult for me to say which direction it will take."

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