[2023 National Audit] Lee Chang-yong Governor "Focus on Price Stability... Continue Tight Monetary Policy Stance"

On the 23rd, at the Bank of Korea in Jung-gu, Seoul, Governor Lee Chang-yong is delivering a greeting at the National Assembly's Planning and Finance Committee's audit of the Bank of Korea.
[Image source=Yonhap News]

Lee Chang-yong, Governor of the Bank of Korea, emphasized on the 23rd that due to the increased price uncertainty caused by the war between Israel and the Palestinian armed group Hamas, "it is necessary to continue a tight policy stance focusing on price stability for a considerable period going forward."

Governor Lee stated in his opening remarks at the National Assembly's Planning and Finance Committee audit held at the Bank of Korea headquarters in Jung-gu, Seoul, "While inflation still significantly exceeds the target level (2%), the volatility of international oil prices and exchange rates caused by the Israel-Hamas conflict has increased, resulting in high uncertainty about the future inflation path."

He explained, "Regarding the economy, although the recovery in consumption appears somewhat weak, the easing of export sluggishness is gradually improving the situation, and a moderate improvement trend is expected to continue next year," adding, "From the perspective of financial stability, the domestic financial system is generally maintaining a stable condition, but attention is needed to the risk of expanding financial imbalances due to increased debt in the household and corporate sectors."

The Bank of Korea emphasized that, given the increased financial risks due to high interest rates and high inflation, it is also promoting market stabilization measures.

Governor Lee said, "In the elevated interest rate environment, to prevent vulnerable sectors from facing difficulties, we have maintained low loan interest rates to support companies affected by COVID-19 and small business owners, and continued support for local small and medium-sized enterprises operating in economically sensitive industries," adding, "we have also restructured the Bank of Korea's lending system to strengthen the liquidity safety net role of deposit-taking institutions in response to changes in the financial environment such as the spread of digital banking."

He continued, "We lowered the applied interest rate on the fund adjustment loan, a standing loan system for banks, and expanded the range of eligible collateral to include corporate bonds to improve accessibility," adding, "we also plan to consider including loan claims of deposit-taking institutions additionally within the scope of eligible collateral in the future."

He particularly mentioned that necessary measures will be taken to prevent increased instability in the domestic financial and foreign exchange markets due to U.S. monetary policy or geopolitical risks.

Governor Lee said, "We promptly implemented market stabilization measures such as repurchase agreement (RP) purchases in response to instability in the short-term financial and bond markets, and during the Saemaeul Geumgo deposit withdrawal incident in July, we flexibly managed liquidity in the short-term funding market and responded swiftly," adding, "we will continue to monitor the possibility of increased volatility in domestic and international financial and foreign exchange markets and promote market stability through appropriate responses when necessary."

Governor Lee also stated that the Bank of Korea will strive for balanced regional development and climate change response. He said, "The Bank of Korea is steadily expanding the role of regional headquarters to promote balanced regional development," adding, "the regional headquarters faithfully perform the role of a think tank for the regional economy through customized research reflecting regional characteristics, and contribute to preparing effective regional economic development plans by communicating smoothly with local governments and academia."

He continued, "In the mid to long term, we also aim to support national responses to climate change," emphasizing, "to this end, we have established and operate a dedicated organization, conducted research on the impact of climate change on our economy and ways to activate green finance, and plan to explore ways to utilize various policy tools to smoothly induce funding supply to eco-friendly sectors."