Lee Chang-yong "Our Living Costs Are Higher Than Other Countries, Structural Improvement Needed" (Comprehensive)

Bank of Korea 'Price Stability Target Operation Status Review' Press Conference
Inflation Expected to Moderate Gradually
Lee Chang-yong "Monetary Policy Board Decides Base Rate Independently"

Lee Chang-yong, Governor of the Bank of Korea, is delivering opening remarks at the briefing session on the operation status of the inflation targeting held on the 18th at the Bank of Korea Annex in Seoul. Photo by Joint Press Corps

Lee Chang-yong, Governor of the Bank of Korea, predicted that inflation will gradually slow down in the future. However, he pointed out that the cost of living in South Korea remains high compared to other countries, placing a burden on the public, and emphasized the need for structural improvements. Regarding future base rate decisions, he stressed that the Monetary Policy Committee will make independent decisions.

At a press briefing on the 'Review of Inflation Target Operation Status' held at the Bank of Korea headquarters in Jung-gu, Seoul, on the afternoon of the 18th, Governor Lee said, "The overall inflationary trend is assessed to be slowing down at a moderate pace."

Downward Stabilization Trend in Core Inflation Indicators

According to the Bank of Korea, the consumer price inflation rate, which was 3.2% in December last year, dropped to 2.7% in May. Core inflation also decreased from 2.8% to 2.2% during the same period, showing a downward stabilization trend in core inflation indicators.

He stated, "Considering the recent decline in international oil prices and agricultural product prices, inflation is expected to continue a moderate slowing trend consistent with the May forecast."

However, he added, "Since uncertainties related to geopolitical risks and weather conditions remain significant, it is necessary to observe a bit longer whether inflation will converge to the target as expected."

He anticipated that the domestic economy will generally follow the growth trend projected in the May forecast. However, due to differences in the recovery pace between exports and domestic demand, inflationary pressure from the domestic demand side is expected to be limited.

Lee Chang-yong, Governor of the Bank of Korea, is delivering opening remarks at the briefing session on the operation status of the inflation targeting held on the 18th at the Bank of Korea Annex in Seoul. Photo by Joint Press Corps

Governor Lee diagnosed, "Although inflation is slowing down, prices of essential consumer goods such as food and clothing in South Korea remain at high levels compared to major countries, resulting in a significant burden on living expenses."

On this day, the Bank of Korea's Research Department analyzed in a report titled ‘Characteristics and Implications of South Korea’s Price Level’ that the price level of food, clothing, and housing in South Korea is more than 1.5 times higher than the average of the Organisation for Economic Co-operation and Development (OECD). The gap in price levels for food, clothing, and housing has widened compared to the past, and the report argued that diversification of supply channels and improvement of distribution structures are urgently needed.

Governor Lee emphasized, "Inflation can be addressed through monetary policy, but the high cost of living compared to other countries is a problem that cannot be solved by monetary policy alone. Although our inflation rate has decreased from 5.0% at the beginning of last year to 2.7% in May this year, this is also why the public does not feel the improvement directly."

He continued, "It is time to consider what structural improvements are necessary to reduce the high cost of living compared to other countries."

Base Rate Decisions Made Independently by the Monetary Policy Committee

Meanwhile, Governor Lee emphasized that future base rate decisions will be made independently by the Monetary Policy Committee.

In response to the question, "Can we say that we are one step closer to a rate cut?" he said this