First Visit to the Ministry of Economy and Finance Since Government Establishment
Emphasizing Balanced Development of Non-Capital Regional Hub Cities
Recently, the visit of Lee Chang-yong, Governor of the Bank of Korea, to the Ministry of Economy and Finance has been a hot topic for consecutive days. This visit, the first of its kind since the establishment of the government, attracted considerable attention, sparking various interpretations regarding its background and significance.
On September 30, Governor Lee visited the Ministry of Economy and Finance to hold a town hall meeting with key executives. This visit was made at the invitation of Deputy Prime Minister for Economy Choi Sang-mok, aiming to strengthen cooperation between the two institutions and discuss solutions to structural problems in the Korean economy.
Enhancing communication between the Ministry of Economy and Finance and the Bank of Korea was one of the main themes of this meeting. Senior officials from the Ministry, led by Deputy Prime Minister Choi, and from the Bank of Korea, led by Governor Lee, gathered to explore ways to address various challenges facing the Korean economy. In particular, the key topic discussed at this town hall meeting was "Untying the Gordian Knot: Structural Reforms for a Sustainable Economy." The Gordian Knot symbolizes a difficult problem to solve, and this theme was used metaphorically to describe the complex crisis situation confronting the Korean economy.
The Gordian Knot originates from an ancient legend in the Phrygian kingdom, where Alexander the Great solved the problem by cutting the knot with his sword. Similarly, the town hall meeting underscored that the Korean economy is at a point where it must find new solutions amid complex issues. The dialogue between Governor Lee and Deputy Prime Minister Choi emphasized innovative policies for the sustainability of the Korean economy, with active discussions among participants.
Deputy Prime Minister Choi referred to the U.S. example, stating that technology-based innovation and industrial innovation centered on the service sector could provide important implications for Korea. As digital technology advances and global service trade rapidly expands, he argued that Korea must find new growth engines in the service industry. He also stressed that attracting global talent and building an open talent ecosystem are essential for the Korean economy.
![Bank of Korea Governor Visits Ministry of Economy and Finance for the First Time... Emphasizes Communication and Structural Reform [AK Radio]](https://cphoto.asiae.co.kr/listimglink/1/2024101108064154424_1728601602.jpg)
On the 30th of last month, Choi Sang-mok, Deputy Prime Minister and Minister of Economy and Finance (left), warmly greeted Lee Chang-yong, Governor of the Bank of Korea, who was visiting the Ministry of Economy and Finance at the central building of the Government Complex Sejong for the first time. [Image source=Yonhap News]
Meanwhile, Governor Lee advocated for balanced development centered on regional hub cities outside the metropolitan area in response to population decline. He pointed out that dispersed regional investments make it difficult to secure investment efficiency and sustainability, presenting a vision for solving structural problems in the Korean economy. He also warned that while AI and digital transformation are expected to increase productivity, they could simultaneously cause issues such as job losses and expanded financial market risks.
During this visit, the two ministries deliberately avoided mentioning interest rates and monetary policy, mindful of the Bank of Korea's independence. However, reporters bombarded Governor Lee with questions seeking hints about interest rate cuts. Governor Lee reiterated that the Monetary Policy Committee will decide on interest rate cuts and made it clear that this meeting would not influence monetary policy. Given that a previous meeting between the Ministry and the Bank in 2014 sparked controversy over interest rates, it appears that discussions on interest rates were preemptively blocked this time.
Meanwhile, expectations are growing that the Monetary Policy Committee will cut interest rates at its meeting on the 11th, as key factors influencing rate decisions?such as inflation and housing prices?have recently stabilized. The recently announced consumer price inflation rate was 1.6%, the lowest in 3 years and 7 months. The decline in oil prices and stabilization of agricultural product prices were the main causes of the inflation drop, leading the Ministry of Economy and Finance to express relief about inflation. However, due to worsening tensions in the Middle East, the possibility of oil prices rising again remains high, leaving inflation risk factors still present.
The real estate market has also shown signs of stabilization recently. While housing prices are no longer rising, demands for interest rate cuts are increasing amid ongoing economic difficulties faced by households with loans, self-employed individuals, and construction workers. As concerns grow about a potential contraction in domestic demand, the Bank of Korea's interest rate decisions are expected to play a crucial role in economic recovery.
The meeting between Governor Lee and Deputy Prime Minister Choi is anticipated to serve as a signal to strengthen cooperation between the Ministry of Economy and Finance and the Bank of Korea. Exchanges among young employees of both institutions are also expected to expand, and the discussions from this town hall meeting are likely to be used as important reference materials in future economic policy formulation.
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