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Think tank chiefs call for additional rate hike

The heads of Korea’s major think tanks Monday emphasized the importance of the nation’s continued efforts to “normalize” macroeconomic policies, citing a sufficient amount of liquidity unleashed in the domestic market.

In their meeting with Finance Minister Bahk Jae-wan in central Seoul, they also shared the view that Korea’s economy is faced with growing external risks from slowing recovery in advanced nations and the ongoing debt crisis in European countries, according to the officials who also attended the closed-door gathering.

“The think tank representatives called for continued efforts to normalize macroeconomic polices, citing the sufficient amount of liquidity in domestic market,” Yoon Jong-won, head of the finance ministry’s economic policy bureau, told reporters after the meeting.

He did not elaborate, but “normalization” can be interpreted as a request for the central Bank of Korea to make an additional increase in its key interest rate in order to stabilize inflation and prevent excess liquidity in the market.

On June 10, the central bank raised its key interest rate by a quarter percentage point to 3.25 percent following a two-month freeze, as it sees growing inflationary pressure due to the economic recovery.

The meeting with think tank chiefs was the first of its kind since Bahk took office on June 2 as the new finance minister. The think tanks included the state-run Korea Development Institute, LG Economic Research Institute, and Hyundai Research Institutes.

The meeting comes before the finance ministry plans to unveil its second-half economy-management plans later this month, where it will set the general direction for its economic policies. The ministry plans to reflect what was discussed during the meeting in the plan.

Earlier this year, the government aimed to achieve a 5 percent economic growth, while stabilizing inflation at around 3 percent.

Many observers say that it might revise the growth and inflation targets in the upcoming economy management plan.

In his inauguration speech, Bahk reaffirmed that his top priority is to stabilize prices and generate jobs in order to make the ongoing economic recovery felt by low- and mid-income earners as well. 

(Yonhap News)