South Korea sees no policy risk from board member replacement

SEOUL: South Korea’s central bank chief said he sees no monetary policy risk from the expected replacement of one of the bank’s seven-member board as all members currently share similar views about the economy.

Although Jang Byung-wha, senior deputy governor and a voting member of the bank’s Monetary Policy Board, is due to finish his three-year term on June 24, the remaining six board members do not differ in how they view the economy, the Bank of Korea governor Lee Ju-yeol said.

“The monetary policy board will temporarily operate in the six-board member system, but I don’t see that as a risk to monetary policy decisions,” Lee said in a press conference.

“That is because the assessment on the financial (markets) and the economy, and how policies should go about accordingly, don’t differ too much among board members.”

The governor’s comments, which suggest there is no dissenting voice on the policy board for now, reaffirm market expectations that the benchmark interest rate will remain unchanged at the current record low of 1.25 percent this year.

President Moon Jae-in needs to appoint the central bank’s deputy governor after the BoK governor makes recommendations.

In an unanimous decision, the BoK kept interest rates unchanged for a 11th straight month in May, meeting market expectations.

The accommodative policy stance underscored the central bank’s keenness to support South Korea’s economy, which grew at its fastest pace in six quarters in the first three months of this year, thanks to robust exports and a construction boom.

Although governor Lee earlier this month said the bank should consider tightening policy as growth accelerates, a majority of analysts see the BoK keeping rates unchanged until next year. The bank will hold its next rate setting meeting on July 13.

Responding to a question on the economy’s downside risks, Lee said declining oil prices and the US Federal Reserve’s pace of monetary policy tightening pose some uncertainties. Governor Lee will finish his term in March 2018.