Deputy Prime Minister Lee Hyung-il and Bank of Korea Governor Shin Hyun-song agreed to strengthen policy coordination to address ongoing burdens on the public, despite positive trends in exports and investment. They emphasized the need to identify risks in the financial, foreign exchange, and real estate markets early and respond proactively.
On the morning of September 28, Deputy Prime Minister Lee visited the Bank of Korea for a meeting with Governor Shin. This meeting took place just six days after Lee's appointment on September 22, highlighting the need for enhanced communication and cooperation between the two institutions amid increased volatility in financial markets and external uncertainties.
Both officials noted that economic indicators, such as exports and investment, are performing well, largely due to a semiconductor boom. However, they also acknowledged rising interest rates in major countries and geopolitical risks contributing to external uncertainties, along with persistent burdens on the domestic front.
In his opening remarks, Deputy Prime Minister Lee stated, “Our economy shows solid growth due to strong exports and a recovery in domestic demand, but we face significant challenges from international capital market volatility and geopolitical uncertainties.” He added that the ongoing impact of conflicts in the Middle East is sustaining pressures on prices and employment, while recovery in vulnerable sectors remains slow.
He also pointed out the increasing interconnectivity among bond, foreign exchange, real estate, and household debt markets. Lee stressed the importance of not only monitoring macroeconomic indicators but also examining movements across various markets and the overall economic risks to strengthen proactive response systems.
Lee proposed discussing collaborative measures to achieve the shared goals of price stability, growth, and financial stability through close communication. He called for enhanced cooperation to comprehensively assess financial market volatility and the interconnections between foreign exchange and asset markets, enabling early identification and response to risks.
As medium- to long-term tasks, they identified the internationalization of the Korean won and digital finance. Lee suggested exploring ways to increase potential growth rates and spread the benefits of growth, expressing hope that this meeting would serve as a stepping stone for deeper collaboration between the government and the Bank of Korea.
Governor Shin assessed that despite external uncertainties, such as the Middle East conflict and rising long-term government bond yields in major countries, the exchange rate remains stable and economic growth is expanding. However, he cautioned that cost factors and unusual income increases could heighten inflationary pressures and financial imbalances.
He explained that the Bank of Korea's recent monetary policy responses aim to control demand-side inflation pressures while enhancing confidence in the economy, which will help stabilize the exchange rate and alleviate cost pressures. Shin anticipates that these measures will also contribute to mitigating financial imbalances alongside the government's macroprudential policies.
Shin emphasized that the Bank of Korea's efforts for price and financial stability will be a crucial pillar in strengthening the sustainable growth foundation alongside government policies. He highlighted the need for both institutions to fulfill their respective responsibilities while sharing perceptions of the economic situation and enhancing policy complementarity.
Both sides agreed to continue communication and collaboration through existing cooperation frameworks, such as market situation assessment meetings and various channels.
* This article has been translated by AI.
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