BOK Senior Deputy Governor Says Rate Hikes Have Side Effects, Calls for Balanced Judgment

Bank of Korea Senior Deputy Governor Kwon Min-soo stated today (the 21st), "While raising interest rates produces policy effects, it can also have side effects," adding, "It seems to be a time to make policy decisions in a balanced, cautious, and, if necessary, flexible manner."

Speaking to reporters at the BOK press room after attending his inauguration ceremony this morning, Senior Deputy Governor Kwon said, "(When deciding on interest rates), we must take into account both growth and inflation, and we will also consider financial stability aspects."

As an ex-officio member of the Monetary Policy Board, Senior Deputy Governor Kwon will participate in the board starting immediately from the monetary policy decision meeting on the 27th.

In his inaugural address, he noted, "Although growth is improving better than expected thanks to a boom in semiconductors, inflation is hovering above target levels, and risks of financial imbalances centered on household debt and housing prices are persisting.

We must also factor in exchange rate volatility and geopolitical and trade risks," adding, "It is a time when cautious and flexible policy judgments are needed."

Senior Deputy Governor Kwon's remarks are drawing attention as they come amid mixed speculation in the financial market over whether the BOK Monetary Policy Board will implement consecutive rate hikes this month, following its decision last month on the 16th to raise the base rate by 0.25 percentage points from 2.50% to 2.75%.

The "balanced judgment" mentioned by Senior Deputy Governor Kwon is interpreted as an expression of the deep deliberation within the BOK, which is weighing various variables after entering a rate-hike cycle for the first time in 3 years and 6 months.

The "cautious and flexible monetary policy" mentioned by Senior Deputy Governor Kwon is also a task that Governor Shin Hyun-song first emphasized when taking office last April.

Reiterating the tasks presented by Governor Shin—such as strengthening the role of financial stability, the internationalization of the Korean won and innovation in payment and settlement, and policy contributions to structural reform—Senior Deputy Governor Kwon said, "I will strive to strengthen the internal administration of the BOK so that these tasks bear fruit through the collective strength of the entire organization."

He stated, "We will ensure that we more faithfully perform our inherent roles of price stability and financial stability," adding, "We will enhance our macroeconomic analysis and economic assessment capabilities, and improve monetary policy tools and market communication."

He continued, "We will also steadily look after mid- to long-term tasks such as structural issues, growth potential, balanced development across regions, sectors, and classes, and climate change."

Regarding the won-dollar exchange rate, which recently dropped to the 1,300 won range, Senior Deputy Governor Kwon told reporters, "The stock market underwent some adjustments, which affected short-term trends, and fundamentally, I believe it is appropriate for it to head downward in terms of fundamentals."

He added, "We do not know how the stock market will change in the future, and the Middle East war is still ongoing," stating, "We cannot completely rule out exchange rates when deciding on interest rates."

When asked by a reporter whether he is a "hawk" (favoring monetary tightening) or a "dove" (favoring easing), Senior Deputy Governor Kwon replied, "I do not want to classify myself as a hawk or a dove yet," adding, "I will make judgments case by case based on data."

He also remarked, "The recent high volatility in the stock and foreign exchange markets is because (our market size) is small compared to our economic scale, Samsung Electronics, and SK Hynix," adding, "I think growing the market is an important task, and the first step is the internationalization of the Korean won."

Regarding the inclusion of Korea in the MSCI (Morgan Stanley Capital International) developed market index, he said, "A considerable number of obstacles have been resolved," adding, "We need to make a lot of effort and achieve results in the second half of the year or early next year."

Senior Deputy Governor Kwon's term is 3 years, running until August 20, 2029.

(Photo provided by BOK, Yonhap News)
※ Please note: This article was translated by AI and may contain errors.