Yoon, central bank differ on key policies

The two men in charge of Korea`s economic and monetary policies differ on two key issues - when to start raising the interest rate and when to revise a law governing the central bank.

The wide gap between Finance Minister Yoon Jeung-hyun and Bank of Korea Governor Lee Seong-tae was laid bare at a parliamentary session yesterday, where lawmakers heard from both sides about a regulatory proposal aimed at giving the central bank a greater role in ensuring financial stability.

While Lee urged the lawmakers to pass the bill without delay, Yoon said it should wait until they sort out a more urgent task of fixing the economy.



The revision bill at question seeks to give the BOK another goal - financial stability - and give it the authority to supervise banks independently of the financial regulatory body, in order to do so. The current law defines the central bank as a mere inflation fighter.

"A problem was born the moment the central bank was derived of the right to inspect banks and it came to the surface after the global financial crisis," Lee said.

The finance minister and the central banker also have a different view - although the difference is much more subtle - on the timing to start unwinding emergency measures taken to shield the Korean economy from the global financial and economic crisis.

Yoon stresses the need to stick to fiscal expansion for a while, warning that a premature exit may choke off the economy`s fragile recovery.

"Make no mistake, the Korean government is committed to maintaining active fiscal and financial policies until the economy is firmly established on a path to recovery," he said in a meeting with foreign reporters yesterday.

"It is premature to implement an exit strategy at the current stage."

Earlier in the month, Lee gave a signal that the key interest rate may be raised as it was left unchanged at a record low level for the past seven months.

"A single hike does not necessarily mean a reversal of the current monetary easing stance," he said.

Between last October and February, the BOK had lowered the seven-day repurchase agreement rate by a total of 3.25 percentage points to 2 percent, in its most aggressive monetary easing.

(milaya@heraldm.com)



By Lee Sun-young