SEOUL, Aug 21 (Reuters) – The new deputy chief of the Bank of Korea said on Friday that monetary policy decisions would be made ‘very carefully’ and flexibly if needed, taking into account various policy factors including the side effects of rate hikes.
“Economic growth and inflation will have to be considered, as well as the aspect of financial stability, while there could also be policy effects as well as side effects from raising interest rates,” Senior Deputy Governor Kwon Min-soo told reporters on the first day of his three-year term.
“It is time to make policy decisions very carefully, and flexibly if needed,” he said.
Earlier on Friday, Kwon said economic growth was improving more strongly than expected, while inflation was exceeding the bank’s target and financial stability risks remained. He also noted foreign exchange volatility and geopolitical risks as policy factors.
Last month, the Bank of Korea raised interest rates for the first time in 3-1/2 years and flagged more to come, as brisk growth in Asia’s fourth-largest economy fanned inflation risks. The bank next meets on August 27.
Kwon, who will also be a member of the central bank’s seven-seat monetary policy board, said policy decisions would be made based on economic conditions and data, when asked if he would define himself as a hawk or a dove.
On the won, which has strengthened sharply since last month to trade around 11-month highs on Friday, Kwon said it would still be a policy variable to consider because there were various external factors, although economic fundamentals suggest it would strengthen further.
(Reporting by Jihoon Lee, Jack KimEditing by Ed Davies)
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