Bank of Korea Governor Cautions on Exchange Rate Volatility, Calls for Policy Coordination with US

Bank of Korea Governor Lee Chang-yong addressed the ongoing volatility in the foreign exchange market, attributing it to uncertainties in both the global economy and domestic politics. Speaking at the Asian Development Bank annual meeting in Milan, Lee emphasized the need for a continued loose monetary policy to bolster the Korean economy. He cautioned that it is premature to declare the bottom of the exchange rate, particularly given the recent appreciation of the Korean won against the US dollar.

Lee noted that the strengthening of the Korean won, along with other Asian currencies, is partly due to pressure from the US government for these currencies to appreciate. He expressed uncertainty about the US government's true intentions regarding the strength of the dollar, suggesting that exchange rates are not easily manipulated in the long term. Lee called for discussions between Seoul and Washington on potential measures to address this issue.

Regarding the Bank of Korea's monetary policy, Lee assured that there should be no doubt about the easing cycle. He emphasized that the central bank will consider the economic situation and sufficiently lower borrowing costs. Lee also mentioned the possibility of lowering the growth forecast while reducing loan interest rates to stimulate the economy.

Lee expressed concerns about the uncertainty caused by the trade policies of the Trump administration and the leadership vacuum in Korea. He referred to the recent resignations of former Prime Minister and Acting President Han Duck-soo and former Finance Minister Choi Sang-moo, stating that Korea needs to explain its current situation to the international community. He called for a swift resolution of the political uncertainty, as it could severely impact the economy by affecting the country's credit standing and corporate investments.

Lee highlighted the potential impact of domestic political uncertainties on the economy, urging for a quick resolution to maintain economic stability. He emphasized that the Bank of Korea will continue to monitor the situation closely and take necessary actions to support the economy.