Concerns about the possibility of undermining the potential growth rate due to the corona crisis
At a meeting of the Bank of Korea Financial and Monetary Committee last month, a number of lawmakers called for attention to the possibility of inflation (increased inflation).
According to the minutes of the Financial Services Commission released by the BOK on the website on the 16th (held on February 25), a member said, “Recently, concerns over inflation are ramping up in the domestic and foreign financial markets, such as the rapid rise in long-term interest rates in major countries.” It is necessary to pay attention to the rapidly expanding liquidity situation in the process of responding to Corona 19.”
“Unlike during the global financial crisis, in addition to the unprecedented drastic easing policies of central banks and governments in each country, credit for financial institutions was supplied on a large scale.” However, as the current liquidity conditions are significantly different from those of the global financial crisis and are linked to the asset market, they must be carefully monitored.”
Another member said, “The sharp rise in the US long-term interest rate reflects concerns over bond supply and demand, economic recovery, and inflation expectations from the Biden administration’s massive economic stimulus plan. Market participants are keenly aware of the timing of the start. “The domestic long-term interest rate is also rising in line with this. It is necessary to pay attention to the recovery of the global economy inherent in the domestic long-term interest rate, the possibility of improving the domestic economy through exports, and inflation expectations. There is,” he advised.
Another member said, “Right now, inflation is low and the outlook for next year is not very high, but when will inflation be able to reach the target level? How will the theme of the 4th industrial revolution affect inflation in the future in the light of the examples of the industrial revolution in the past? It is necessary to analyze various issues such as in a more long-term clock,” he suggested.
“As the level of raw material prices such as international grain prices has risen significantly above the average level of 10 years since the global financial crisis, there is a possibility that upward pressure on the cost side will continue, and management prices may weaken in influence along with the government’s fiscal capacity issue. “Therefore, it is necessary to look at the changing inflation environment from a broader perspective, and to forecast mid- to long-term prices as some members mentioned earlier.”
In addition, voices of concern about the decline in the potential economic growth rate due to Corona 19 were also heard at the meeting.
“According to some analysis, despite the shock of gross domestic product (GDP) during the past financial crisis, according to some analysis, the potential growth rate was maintained, but the potential growth rate itself decreased during the global financial crisis. Along with the decline, there is a possibility that the potential growth rate was undermined.
“Please pay more attention to this issue in the future.”
/yunhap news
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