Bank of Korea pledges coordination to soften economic landing

BANK of Korea (BOK) governor Rhee Chang-yong said the central bank will do its best to coordinate policy with the government, to ensure the economy has a soft landing at a time when South Korea faces an array of headwinds, from falling exports to a weakening property market.

The BOK will monitor financial and foreign exchange markets closely and take measures if needed to help maintain their stability, Rhee said in a message to financial institutions to mark the new year. He added that the central bank will maintain its focus on fighting inflation.

While largely in line with an earlier speech he had made on Jan 1, Rhee’s comments highlight the importance of cooperation between the central bank and the government, as economic growth slows while interest rates remain elevated. Housing prices have started to fall at a rapid pace while consumption has slackened. At the same time, foreign-exchange volatility has become a concern for policymakers.

The BOK has its next rate decision on Jan 13, where it is widely expected to raise the benchmark rate by another quarter point, in what could be the last hike of the current tightening cycle. The rate currently stands at 3.25 per cent. BLOOMBERG