[Column] Is It Okay to Have One Less Member on the Geumtong Committee?

It has been over a month since a vacancy appeared in the Monetary Policy Committee (MPC) seat that determines the direction of South Korea's monetary policy. In early December last year, Park Chun-seop, the economic chief secretary, stepped down from the MPC position, leaving one seat vacant out of the seven members. With the MPC operating with six members, the second base interest rate decision of the new year is scheduled for the 22nd of next month.

Since the Bank of Korea's monetary policy is decided with a medium- to long-term perspective, consistency is crucial. The MPC's decisions on interest rate hikes or cuts affect the entire economy, from households to the financial sector and businesses. This is also why the 'staggered term system' was introduced through the 2018 amendment of the Bank of Korea Act to prevent mass replacement of MPC members.

However, given the upcoming general elections, it is naturally difficult to appoint a new MPC member, according to insiders both inside and outside the Bank of Korea. With the only female member, Seo Young-kyung, nearing retirement, various candidates, including female professors, have been mentioned, but the timing of the appointment remains shrouded in uncertainty.

According to the Bank of Korea Act, the quorum for holding an MPC meeting is at least five members, so there is no serious disruption. During the Lee Myung-bak administration, there was even a period when MPC seats remained vacant for as long as two years. There is no legal requirement on how quickly the vacancy must be filled.

However, this year is an important year preparing for pivoting (a shift in monetary policy direction), as both the U.S. and South Korea are widely expected to lower their base interest rates. The appointment should be completed as soon as possible to restore the MPC to a full seven-member body, maintaining consistency and trust in monetary policy.

Moreover, the independence of the central bank is increasingly emphasized these days. Many people, exhausted by prolonged high interest rates, eagerly await when the base rate will be cut, but the Bank of Korea's primary goal is ‘price stability.’ Since the consumer price inflation rate still exceeds 3%, it is time to worry more about inflation than the economy. From the inflation perspective, although the direction differs, when the need to raise electricity rates was emphasized last year, some argued that an independent electricity rate decision body ‘as independent as the MPC’ was necessary, underscoring the importance of the MPC's independence.

If the MPC seat remains vacant continuously, there is a risk that the public will develop a mistaken perception that the position deciding the base interest rate in South Korea's economy is a ‘lightweight seat’ that can be left unfilled by ‘one person.’