Chang Yong Rhee: Korea's monetary policy amid an accelerated global monetary tightening

Speech by Mr Chang Yong Rhee, Governor of the Bank of Korea, at the Peterson Institute for International Economics (PIIE), Washington DC, 15 October 2022.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Central bank speech  | 
28 October 2022

I am honored to be invited to PIIE and grateful to Dr. Adam Posen and my other friends here for providing me with this opportunity to talk about Korea's monetary policy amid an accelerated global monetary tightening cycle. I would also like to express my congratulations to Dr. Fred Bergsten on his retirement and my sincere gratitude for his excellent contributions and policy advice to the Korean government, especially for the G20 Summit in Korea in 2010. Unlike my previous visits to PIIE as director of the IMF Asia and Pacific Department, this time I feel it is more appropriate to confine my talk to Korea-specific issues rather than discuss the Asia region more broadly. You may also find me to be more ambiguous and less straightforward than before, which is a virtue I am working to develop as a central banker.

Only three days ago, the Bank of Korea decided to increase its policy rate by 50bp to 3.00%, the second 50bp increase since July, when the policy rate was increased by 50bp for the first time in our history. Considering the high proportion of floating rate mortgage loans in Korea, over 60% compared with less than 10% in the US, you can think of our 50bp increase as having the equivalent impact of a 75bp increase by the Fed. Before delving into the complex backdrop behind this decision, let me briefly explain the BOK's monetary policy decisions since the first lift-off last year after the COVID-19 shock.