Lee Chang-yong: "We Must Proactively Give Interest Rate Signals to Stabilize Expectations"

Lee Chang-yong, nominee for Governor of the Bank of Korea, is attending the confirmation hearing held at the National Assembly on the 19th, responding to questions from lawmakers. Photo by Yoon Dong-joo doso7@

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[Asia Economy Reporter Seo So-jung] Lee Chang-yong, the nominee for Governor of the Bank of Korea, expressed the view that it is important to proactively give interest rate signals to stabilize expectations in response to high inflation.

At the National Assembly's Planning and Finance Committee confirmation hearing on the 19th, in response to a question from Ju Ho-young, a member of the People Power Party, Lee said, "Since expected inflation is rising, even if it is unpopular, we will give signals to prevent prices from rising further."

Lee diagnosed, "Inflation is influenced by supply-side factors, and there are also supply chain issues. On the demand side, fiscal spending has increased significantly, and once social distancing ends, pent-up consumption may increase, which could drive inflation up."

Regarding the future direction of monetary policy, he replied, "If we do not give signals in advance through interest rate hikes to control prices, inflation could rise further due to expectations. I believe that proactively giving interest rate signals to stabilize expectations is the right approach so far."

He pointed out that, unlike the U.S., where interest rates were raised rapidly after prices increased, such a move can cause significant side effects for vulnerable groups.

Lee emphasized, "The household debt issue is also related to real estate, so giving signals through interest rates is important, but it is impossible to solve it with the Bank of Korea's interest rate policy alone. A government-wide task force (TF) should be formed to devise comprehensive solutions considering structural, fiscal, and vulnerable group issues."

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