Lee Chang-yong: "We Must Be Confident in Converging to Korea's Target Inflation Before Turning on the Pivot Signal"

US CNBC Interview
"US Rate Cut Likely This Year"
"Will Intervene If Exchange Rate Volatility Increases... Resources Are Sufficient"

Lee Chang-yong, Governor of the Bank of Korea, is delivering opening remarks at a press conference related to the January Monetary Policy Committee interest rate decision held at the Bank of Korea in Jung-gu, Seoul on the 11th. Photo by Joint Press Corps

Lee Chang-yong, Governor of the Bank of Korea, said on the 17th, "We must be confident that headline inflation is converging to the target before we can turn on the interest rate cut turning signal."

Governor Lee made this remark during an appearance on CNBC News in Washington DC, where he was attending the G20 Finance Ministers and Central Bank Governors Meeting. He mentioned that it is difficult to discuss interest rate cuts as Korea's current headline inflation is higher than core inflation.

He said, "Unlike the US and Europe, the current headline inflation is higher and sticky compared to core inflation, and we are worried about when we can be confident that inflation will reach the target point (2%). Only then will we be able to turn on the interest rate cut turning signal."

Regarding whether the delay in the US interest rate cut timing is affecting central banks' monetary policies, he said, "This year, there will be more differentiation in monetary policies among major countries," but added, "Although the expected timing of the US rate cut is delayed, it is expected (expect) to be implemented in the latter half of this year, and I hope (hope) that it will."

On the recently soaring exchange rate, he said, "The volatility is excessive," and added, "If the volatility increases further, we can intervene (market stabilization measures), and we have sufficient tools and resources to do so." The Bank of Korea and the Ministry of Economy and Finance conducted verbal intervention the day before when the exchange rate surged to 1,400 won.

Regarding the reason for the intensified exchange rate volatility, Governor Lee said, "While a strong dollar is a factor, geopolitical situations such as instability in the Middle East are also influencing it," and added, "The weakness of the yen and yuan in our neighboring countries (Japan, China) is also having an impact."