SEOUL, April 21 (Reuters) – South Korea’s newly appointed central bank governor, Shin Hyun-song, said on Tuesday the country’s monetary policy needed to be cautious and flexible amid heightened inflation and growth uncertainty due to the Middle East conflict.
“As uncertainty has increased over inflation and growth paths due to the supply shock caused by the Middle East war, it is necessary to seek price stability and financial stability through cautious and flexible monetary policy operations,” Governor Shin said in his inauguration speech.
He said a rise in oil prices triggered by the Iran war had increased upward pressure on inflation and downward pressure on economic growth, along with heightened volatility in financial markets and accumulating risks of financial instability.
Earlier this month, the Bank of Korea kept its policy interest rate steady and warned of a highly uncertain path ahead, as the central bank flagged upward revisions to its inflation forecasts and a downgrade in growth projections.
Among policy initiatives Shin plans to pursue, he said he would study ways to strengthen the central bank’s role in financial stability, while seeking a three-way balance between the internationalisation of the won currency, digital innovation in payment settlements and macro-prudential mechanisms.
Shin also said the central bank would play an active role on structural economic reforms, which he described as a key variable that could impact the effects of monetary policy.
Shin, who began his four-year term on Tuesday, will chair his first policy meeting on May 28.
(Reporting by Jihoon LeeEditing by Ed Davies)
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