South Korea's central bank will maintain its policy bias of monetary tightening down the road, but a rate hike will be a matter of time, its chief said Sunday.
In September, the Bank of Korea (BOK) unexpectedly froze its key interest rate at 2.25 percent for the second straight month following the July rate increase.
The decision invited criticism from market participants and some analysts who argued that the BOK gave a muddled policy signal as its chief's repeated emphasis on price stability had been viewed as a hint for an imminent rate hike.
"(The central bank) has not changed direction. It is a matter of turning right now or next time," BOK Gov. Kim Choong-soo said in a workshop with reporters in response to the market's criticism.
"Once (we decide to) make a right turn, we will turn right. You should not assume that (we) will not turn right."
His remarks came as the South Korean economy is on a solid recovery track, aided by brisk exports and improving domestic demand. In July, the BOK hiked the borrowing costs by 0.25 percentage point from a record-low 2 percent, the first rate increase since the onset of the global financial meltdown.
But growing concerns of the flagging global economy are coming as downside risks to the growth, making policymakers cautious about the timing of the policy normalization.
Gov. Kim hinted on Sept. 9 that the pace of monetary tightening is expected to be gradual and modest, given the fragile global recovery.
Kim's remarks also came under spotlight as one BOK policymaker said in a contribution to a local newspaper that the governor has not fully delivered views of all board members at press conferences which have been held after a monthly rate session.
Kang Myung-hun, widely seen as dovish among BOK board members, said Gov. Kim has presented his views about the economy and inflation quite strongly as a central bank chief, not as a chairman of the policy board, adding that what the market has overlooked is that a BOK chief casts just one vote in a rate decision.
"It is not proper to comment on (Kang's personal) views," Kim added.
Regarding Japan's recent intervention in the currency market, the governor said it would be difficult to see intended effects if there is no policy coordination from other central banks like the United States and China.
Japan stepped in the currency market on Wednesday for the first time in more than six years in a bid to curb the yen's sharp gain against the U.S. dollar that is threatening to dent its fragile recovery.
"Many countries have learned lessons about the importance of policy coordination from the global financial crisis ... As the markets are interconnected and countries understand that there would be no policy effects without cooperation, I think policymakers (around the globe) would do so," Kim said. (PNA/Yonhap)
Linkback:
https://tubagbohol.mikeligalig.com/index.php?topic=32311.0
