National audit of the Bank of Korea by the National Assembly's Finance and Economy Planning Committee
Bank of Korea Governor Shin Hyun-song said Monday that raising interest rates preemptively in August had bought the central bank valuable time, adding that while rate increases are painful, acting ahead of the market allows the bank to maintain stability and ultimately reduce economic costs.
Shin made the remarks during a national audit by the National Assembly's Finance and Economy Planning Committee, responding to a question from Democratic Party of Korea lawmaker Moon Jin-seog about the side effects of forward guidance. Shin said the Bank of Korea had set its monetary policy course — toward rate increases — somewhat earlier than other major economies, and that moving before the Federal Reserve's rate hike in September had given the bank room to maneuver. "Acting preemptively carries far lower economic costs than being forced by the market to raise rates defensively later," he said.
Shin went on to say that South Korea's government bond market had remained relatively stable, noting that yields had settled more than in other major economies following the central bank's announcement that it would reduce the volume of bond issuance and purchase bonds if necessary.
kimstar@heraldcorp.com
