Seoul: New Bank of Korea (BOK) Gov. Shin Hyun-song on Tuesday emphasized the need for a cautious and flexible monetary policy in response to uncertainties arising from the ongoing crisis in the Middle East.
According to Yonhap News Agency, Shin outlined his approach during his inauguration speech as he began his four-year term, succeeding outgoing Gov. Rhee Chang-yong. He highlighted the challenges posed by the Middle East conflict, noting that rising global oil prices have increased inflationary pressures while simultaneously exerting downward pressure on economic growth. Shin also pointed to the persistent volatility in financial markets and the risk of accumulating financial imbalances.
Shin stated that due to the uncertainty in inflation and growth trajectories, monetary policy should be carefully and flexibly managed to maintain stability in prices and financial markets. He also committed to enhancing the effectiveness of monetary policy by reassessing available tools and actively using market-based price indicators to strengthen early warning capabilities.
Earlier this month, at its rate-setting meeting, the BOK maintained its benchmark interest rate at 2.5 percent. This cautious stance was influenced by the escalation of the Middle East conflict, which began in late February following U.S.-Israeli strikes on Iran, leading to broader regional instability and affecting global markets and economies. Shin had previously indicated that it was premature for the BOK to make decisive policy moves, describing the decision to hold rates as "strategic patience."