Why Pigeon Joo Sang-young, a Kookmin Bank Monetary Policy Committee Member, Issued a Lone Dissenting Opinion (Summary)

June 10 Bank of Korea Monetary Policy Committee Minutes
Heated Debate Over Phrase 'Maintain Current Monetary Policy Easing Stance for the Time Being'

Joo Sang-young, Member of the Monetary Policy Committee, Bank of Korea
Photo by Yonhap News

[Asia Economy Reporter Kim Eunbyeol] It has been confirmed that the Monetary Policy Committee (MPC) of the Bank of Korea engaged in a heated debate over adding the word "for the time being" to express the period during which the monetary easing stance would be maintained at the meeting held on the 10th. In particular, MPC member Joo Sang-young, known as a "dovish" member (favoring monetary easing), strongly opposed the addition of the term "for the time being."

According to the MPC minutes (held on June 10) released by the Bank of Korea on the 29th, six out of seven members agreed to state in the conclusion section titled "Future Policy Direction" of the Monetary and Credit Policy Report submitted to the National Assembly that "for the time being, the current monetary easing stance will be maintained."

At the MPC meeting on May 27, when the base interest rate was held steady, the wording of the resolution ("the monetary easing stance will be maintained") was effectively supplemented by adding "for the time being." By adding the premise "for the time being," it is interpreted as implying that the time to end the monetary easing stance is approaching.

Within the Bank of Korea, "for the time being" is understood to mean a shorter period than "for a considerable time." Since "for a considerable time" in statements such as those from the U.S. Federal Open Market Committee (FOMC) is interpreted as about six months, "for the time being" ultimately refers to a few months shorter than six months. Considering that half of this year has already passed, this effectively sets the timing for a rate hike within the year.

Some MPC members at the Bank of Korea cited the need for the expression "for the time being" to facilitate smooth communication with the market. One member explained, "It is important to communicate the MPC's views accurately to the market, which will guide market expectations and contribute to enhancing the credibility of monetary policy in the medium to long term. It is desirable to comprehensively describe messages from the Bank of Korea governor's opening remarks and Q&A sessions at press conferences."

However, MPC member Joo Sang-young clearly expressed opposition to adding the term "for the time being." Member Joo stated, "It is preferable to reflect the MPC resolution unanimously decided on May 27 as is," and clearly opposed adding the phrase "for the time being."

Member Joo further expressed the opinion that "although our economy is showing signs of recovery thanks to multifaceted policy responses, the current state is still only in the early stages of recovery, and even if inflation has escaped downward pressure, it still falls significantly short of the Bank of Korea's medium-term target. It is too early to discuss normalization of monetary policy."

Member Joo is considered a representative dovish member among the Bank of Korea MPC members. In the minutes of last month's MPC meeting, only one member clearly expressed a preference for monetary easing, which is presumed to be Member Joo.

In the minutes, the MPC member stated, "It will take considerable time to return to the pre-pandemic potential growth trend, and it will also take a significant amount of time for GDP growth to translate into expansions in household income, wages, employment, and consumption." Regarding inflationary pressures, the member said, "Even though inflation has escaped downward pressure, it remains below the Bank's target level, and there is no clear reason to preemptively curb the momentum of economic expansion." The Bank of Korea's inflation target is 2.0%. Inflation is expected to move around 2.0% this year, and next year, inflation is projected to fall compared to this year, which had a COVID-19 base effect.