SEOUL (Reuters) – The governor of South Korea’s central bank said on Monday a more sophisticated monetary policy was necessary this year, citing risk to growth and financial stability major policy factors.
“Going forward, we will have to carry out monetary policy in a more sophisticated manner, taking into account downside risks to growth, financial stability risks as well as changes in major countries’ monetary policies such as the United States,” Governor Rhee Chang-yong said in remarks at the Bank of Korea’s (BOK) 73rd anniversary ceremony.
The inflation rate has cooled to a 19-month low due to the central bank’s prompt response, Rhee said, but he added it was too early to take relief and the bank would continue to closely monitor inflation’s easing pace.
Despite signs of the property market stabilising, rising delinquency rates for real estate loans require close attention for related financial risk, Rhee said, adding authorities should seek mid- and long-term plans for the gradual de-leveraging of household debt.
Rhee’s comments come as sudden interest rate hikes in other major economies last week, such as Canada and Australia, after a pause raised views that the global fight against inflation was yet to be over.
They also come before the U.S. Federal Reserve’s policy meeting this week, at which that central bank is widely expected to hold interest rates steady and end its run of 10 consecutive rate increases that began in March 2022.
“With inflation and economic growth conditions highly likely to be different from country to country this year, sophisticated policy responses to balance the trade-off between inflation and growth have become important,” Rhee said.
The South Korean central bank held its interest rates steady last month, holding fire for a third meeting to assess the impact of previous increases.
The BOK, which was one of forerunners of the post-pandemic monetary tightening campaign, raised rates by 300 basis points over 1-1/2 years through January, bringing its policy rate to the highest since late 2008.
(Reporting by Jihoon Lee; Editing by Christopher Cushing)
