Lee Chang-yong: "Balancing Growth and Inflation Conflicts... Will Actively Advise on Macroeconomics" (Comprehensive)

Lee Chang-yong, the new Governor of the Bank of Korea, is delivering his inaugural speech at the inauguration ceremony held on the 21st at the Convention Hall of Booyoung Taepyeong Building in Jung-gu, Seoul. Photo by Joint Press Corps

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[Asia Economy reporters Seo So-jeong and Lee Ji-eun] "Since the conflicting relationship between growth and inflation is further constraining the conduct of monetary policy, it is time to operate policies with a finely tuned balance."

Lee Chang-yong, the new Governor of the Bank of Korea, stated in his inaugural speech on the 21st, "The prolonged Russia-Ukraine war, the Federal Reserve's faster-than-expected monetary policy normalization, and the possibility of economic slowdown in China due to the spread of the Omicron variant are all aggravating the difficulties of monetary policy."

Governor Lee began by saying, "The Korean economy is now at a turning point," and expressed concern that "our highly externally dependent economy is at a difficult juncture where it is hard to predict whether it can overcome the challenges of transitioning to a new normal after the COVID-19 crisis and take a leap forward, or whether it will fall into a long-term low-growth phase due to ongoing aging and declining productivity trends."

He emphasized, "At this crossroads, it is time to boldly change the framework of economic policy so that our economy can make the right choice," and added, "We must promote qualitative growth more creatively, led by the private sector."

He mentioned the urgency of diversifying exports and supply chains. Governor Lee said, "We must hasten efforts to reallocate resources through structural reforms," and warned, "We must not fall into the mistake of hesitating to switch to a new horse just because the racehorse is tired and not as good as before, while being trapped by past successes."

He also identified the issues of income inequality and polarization, which may arise during the structural reform process, as challenges to be addressed. Governor Lee stated, "Excessive polarization will deepen social conflicts and damage our growth potential, so solutions are also necessary."

He expressed concern about the rapidly increasing household and government debt. He said, "We know from past experience that continuous expansion could lead to a bubble burst, causing enormous social costs," and added, "As the Bank of Korea pursues macroeconomic stability, we cannot ignore the smooth landing of the debt issue."

[Image source=Yonhap News]

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In particular, Governor Lee called for an expansion and change in the role of the Bank of Korea as a central bank. He emphasized, "Considering the medium- to long-term challenges facing our economy, our responsibility cannot remain confined to the framework of monetary policy," and added, "To prevent our economy from falling into the swamp of long-term low growth, monetary policy alone is not enough; fiscal policy and structural reforms must be implemented together." He explained that the role of the central bank inevitably grows as economic conditions worsen.

Governor Lee mentioned three fences that the Bank of Korea must overcome. He said, "We must surpass the fences of our own expertise, communication with the outside, and domestic boundaries," and stressed, "Although there are concerns about the central bank's independence in communicating with the government, constructive dialogue with the government, market, and private institutions is essential to solve the challenges of our times."

He then urged the staff, "Let us strengthen the Bank of Korea's position not only as the main actor of monetary and credit policy but also as the undisputed 'best domestic think tank' that understands our economy well," and added, "Let us all become one team so that in the future, when we look back on this time, we can take pride in having led the Korean economy on the right path at a turning point."

Additionally, drawing from his personal experience, he advised employees to maintain a ‘work-life balance,’ which attracted attention. He said, "I recently experienced serious health difficulties due to COVID-19," and mentioned, "The position of Governor of the Bank of Korea is a precious opportunity to use my second life meaningfully." Governor Lee added, "Health and bonds with family are valuable assets," and he conveyed, "I learned this through illness, but I hope (Bank of Korea employees) will feel it without getting sick."

Governor Lee received his appointment letter from President Moon Jae-in in the morning and officially took office in the afternoon. During the reception after the ceremony, President Moon said, "At this point, the most important and tangible issue for the people is price stability," and urged, "Focus on price stability, but also achieve growth together, which is a difficult task but must be managed."

In response, Governor Lee said, "The mission of the Bank of Korea is to maintain the macroeconomic framework rather than short-term achievements," and pledged, "We will prioritize efforts to harmonize inflation and growth and to resolve household debt and real estate issues." He also expressed his ambition, saying, "I will lead the organization well and offer frank advice for macroeconomic stability," and added, "I will be an active advisor, not a quiet one."

Governor Lee’s term will last four years until April 20, 2026.

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