[Asia Economy Reporter Eunbyeol Kim] In April, the terms of four out of seven members of the Bank of Korea's Monetary Policy Committee (MPC) will expire. There is growing interest in whether the base interest rate will be cut before the expiration of their terms, as there are expectations that the outgoing members may push for a rate cut.
According to the Bank of Korea on the 5th, the terms of MPC members Go Seung-beom, Shin In-seok, Lee Il-hyung, and Jo Dong-cheol will expire on April 20. Among the MPC members, only Governor Lee Ju-yeol (who also serves as MPC chairman), First Vice Governor Yoon Myeon-sik (ex officio), and member Lim Ji-won, who was appointed last May, will remain.
The market is placing weight on the possibility of a rate cut before the MPC members are replaced. Given the ongoing economic slowdown, there is analysis that a rate cut is necessary, and opinions advocating for an early rate cut to allow new MPC members time to adjust are gaining traction.
In particular, among the MPC members whose terms are expiring, Shin In-seok and Jo Dong-cheol are classified as doves (favoring monetary easing). These two members previously argued for the necessity of a base rate cut at the MPC meeting in November last year.
The regular MPC meetings before the expiration of the four members’ terms are scheduled for January 17, February 27, and April 9.
The MPC entered a rate-cutting cycle last July by lowering the base rate from 1.75% to 1.50% for the first time in 3 years and 1 month. It was lowered once more in October from 1.50% to 1.25%. Experts expect the MPC to cut rates once more before ending the rate-cutting cycle.
However, there is also some attention on the slight possibility of MPC members being reappointed.
Governor Lee explained at a New Year’s gathering with reporters on the 2nd, "The Bank of Korea Act was amended because it was deemed undesirable for the majority of MPC members to be replaced at once," adding, "We need to see whether all four will necessarily be replaced."
According to the amended Bank of Korea Act in March 2018, the terms of two MPC members (recommended by the Bank of Korea and the Financial Services Commission) were reduced to three years for one term only. Under the Act, the Governor, First Vice Governor, and MPC members can be reappointed once. However, no MPC member has been reappointed to date.
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