BOK Chief Highlights Exchange Rates as Crucial in Recent Rate Decision

SEOUL: Exchange rates have resurfaced as a critical element in the Bank of Korea's (BOK) monetary policy decisions, according to central bank Governor Rhee Chang-yong. His comments were made during a press conference held alongside meetings of the Group of 20 finance ministers and central bank chiefs, as well as the International Monetary Fund-World Bank Group in Washington, D.C. According to Yonhap News Agency, Governor Rhee noted the significant rise in exchange rates, particularly the rapid appreciation of the U.S. dollar against the South Korean won. This shift was factored into the BOK's recent decision to adjust its benchmark interest rate. On October 11, the central bank reduced the rate by 25 basis points to 3.25 percent, marking its first rate cut since August 2021. This decision followed a similar move by the U.S. Federal Reserve, which reduced its rate by half a percentage point last month. Governor Rhee expressed expectations that the Federal Reserve's policy shift would stabilize the dollar-won exchange rates. However, the dollar has continued to strengthen due to a robust U.S. economy and investor speculation on the potential for a Trump victory in the upcoming presidential election. Looking ahead to next month's rate-decision meeting, the BOK will evaluate various factors, including the slowing pace of export growth, the effects of macroeconomic policies on financial market stability, and the possibility of a continued dollar rally post-election. Rhee also addressed the growth rate of South Korea's economy, asserting that it is not a primary concern in determining policy rates. Despite potential setbacks in the fourth quarter, the economy is expected to grow by at least 2 percent for the year. The country's real gross domestic product experienced a modest 0.1 percent growth in the July-September period. The governor advised against overreacting to quarterly fluctuations in economic growth.