Prepare response when spreading private digital currency
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The Bank of Korea decided to actively participate in discussions in the National Assembly by reviewing major issues related to expanding its role, such as adding job security obligations to the purpose of its establishment. Regarding the recent domestic economic situation, it was evaluated that the potential risk slightly increased, such as a large increase in the debt of the economic entity in the process of responding to the novel coronavirus infection (Corona 19). Consumer prices are expected to rise to around 1%.
On the 23rd, the BOK announced in a report on the extraordinary National Assembly, saying, “In connection with the discussion on strengthening the role of the BOK, we will review measures suitable for the domestic economic conditions.” The National Assembly has proposed a bill to add job security other than price stability and financial stability to Article 1 of the BOK Act, which stipulates the purpose of establishing the BOK.
BOK Governor Lee Ju-yeol said, “We will examine the possibility of conflict between policy goals, the relationship between growth and employment after the financial crisis, and the effects of the monetary policy on the employment ripple effect.” Said.
The BOK also decided to expand statistics in response to new policy demands. If necessary, the news sentiment index will be tested, and statistics related to income distribution and quality of life will be reinforced. Research on the institutional conditions and technical feasibility of the central bank digital currency (CBDC) issuance will be strengthened. Through external consulting, which will be completed at the end of this year, the CBDC pilot system will be built and tested in a virtual environment in the second half of this year. In addition, if the use of private digital currency spreads, it will analyze the possible impact on payment and settlement, and seek countermeasures.
As for the current domestic economic situation, exports are showing good performance and facility investment continues to recover, but consumption is evaluated to be sluggish due to the re-proliferation of Corona 19 and the resulting reinforcement of social distancing. Governor Lee diagnosed, “The domestic economy will recover gently, centering on exports and investments, driven by global economic improvement, but the uncertainty in the future growth path is high, depending on the development of Corona 19.”
Consumer inflation is expected to continue low in the mid-0% range due to weakening inflation pressure on the demand side due to the spread of Corona 19. However, the price of agricultural and livestock products has been on the rise due to the cold wave and bird flu, and the price of petroleum products is also shrinking as international oil prices rise. The BOK predicted that the rate of increase in consumer prices would increase to around 1% in the future. It is analyzed that home sales prices are on the rise in both the metropolitan area and provinces due to expectations of rising prices, and jeonse prices continue to rise due to concerns over supply-demand imbalances.
It is evaluated that the domestic financial system is generally stable, but the potential risks have slightly increased, such as a large increase in debts of economic actors in the process of responding to Corona 19. The financial stability index rose to 20.7 in May of last year, at the beginning of Corona 19, and then declined, but remains at the cautionary level (8-22) until January (8.8) this year.
/ Reporter Jo Ji-won [email protected]
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