The central bank’s latest rate cut, which was contrary to the market forecasts, appeared to be attracting backlash from not only the industry for yielding to government pressure, but also within the organization.

A senior manager at the Bank of Korea blatantly criticized the central bank for lowering its key base rate, saying that it was an illogical decision that only damaged its credibility as an independent entity.

The manager wrote that its rate cut on Thursday went against what BOK Gov. Kim Choong-soo had been saying before the National Assembly or during the ASEAN central bankers’ meeting in India last week.

Kim had maintained the central bank’s position over the benchmark interest rate, resisting pressure by the government to loosen its monetary policy to support its fiscal stimulus. The BOK froze its key rate for six straight months, and slashed the rate on Thursday, saying that it would only be right to assist the government in increasing the effect of its fiscal stimulus.

The central bank’s change of heart made no sense, the manger said, as there was no change to its projections on the economy or inflation. Also, Europe’s rate cut is not enough to justify the BOK to follow given that Europe has the capability to do so since the euro is one of key international currencies.

Thursday’s rate cut has only left a wound on the BOK’s independence, as well as adversely affected the policy mix with the government, the manager said.

The country’s central bank has frequently come under pressure for failing to act independently, and succumbing to pressure from the Finance Ministry.

The ministry lauded the recent rate cut, saying that coupled with the decision to inject the nation’s fiscal budget, the economy would receive a big boost.

By Park Hyong-ki (hkp@heraldcorp.com)