Request to freeze the policy rate?…Prime Minister Kim: "Coordination between the BOK and the government for exchange-rate and price stability"

Unusual meeting between the Prime Minister and the BOK Governor

Governor Lee: "The BOK will continue structural reform research not only for short-term economic stability but also to expand growth potential" responds

Will the government respond to requests to freeze rates by expanding potential?

Prime Minister Kim Min-seok said on the 9th at a meeting with Lee Chang-yong, governor of the Bank of Korea, "Coordination between the BOK and the government is important for market stability, such as exchange rates and price stability." Given the soaring won·dollar exchange rate and price burdens, some interpret this as an indirect request from the government regarding policy on the benchmark interest rate.

At a morning meeting with Governor Lee at his office in the Government Seoul Office, Prime Minister Kim said, "The government will do its best to settle the ember of economic recovery and spread it to stabilize people’s livelihoods." He added, "The government plans to do its best to ease street-level price burdens, revitalize regional economies, and expand growth potential through AI transformation·super-innovation economy."

Governor Lee Chang-yong said, "The BOK will continue structural reform research not only for short-term economic stability but also to expand mid- to long-term growth potential," and "we will further strengthen communication and cooperation with the government."

The meeting between the head of the monetary authority and the Prime Minister is seen as unusual. Until now, Governor Lee has frequently met with Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol to coordinate monetary and fiscal policy. But official meetings with the Prime Minister are rare, so market interest in Prime Minister Kim's remarks is growing.

There are various interpretations of Prime Minister Kim's statement that "coordination between the BOK and the government is important for market stability." The exchange rate has recently been soaring around 1,470 won, and inflation last month was 2.4%, exceeding the price-stability target (2.0%). In addition, house prices, centered on the Seoul metropolitan area, had been on the rise but have been catching their breath since the 1015 measures. In this context, Prime Minister Kim's remark about 'coordination' has been analyzed as containing a message to maintain the current stance of keeping the policy rate unchanged. The Bank of Korea froze the policy rate at an annual 2.50% on the 27th of last month.

A Prime Minister's Office official explained, "Going forward, the Bank of Korea plans to continue to share perceptions on major economic and financial issues and communicate closely."

Kim Ik-hwan reporter lovepen@hankyung.com