Joo-yeol Lee
Lee Ju-yeol (pictured), the governor of the Bank of Korea, predicted that this year’s inflation rate could be slightly higher than the BOK’s forecast (1.3%). He said, “It is not very likely that inflation will continue to expand.” It means that prices will rise faster than expected as the economy recovers from the aftermath of the novel coronavirus infection (Corona 19), but that level will not be severe.
It may exceed the expected 1.3%, but
The possibility of expanding inflation is not great
Base rate hike is premature
On the 24th, President Lee gave a written answer to major economic issues. Governor Lee said, “Recently, concerns about inflation are growing, especially in the US,” and said, “In Korea, consumer inflation has increased from 0% to 1% due to the wider rise in oil prices and the soaring prices of agricultural and livestock products.” He said, “As a whole, (inflation rate) is expected to be higher than the previous forecast of 1.3%,” he said. “If the Corona 19 situation calms down and the repressed demand erupts, the inflation rate may temporarily increase.” Still, he added, “It is still expected to fall below the 2% target level for price stabilization.” In its economic outlook announced last month, the BOK predicted that this year’s inflation rate will reach 1.3% and next year it will reach 1.4%.
Governor Lee suggested that it is premature to raise the base rate. He said, “It is difficult to see that our economy has recovered from the Corona 19 shock and returned to its normal trajectory,” he said.
Governor Lee said he is “watching close” on the direction of monetary policy and uncertainty in the financial markets of the US central bank, the Federal Reserve System (Fed). He added that the financial market’s expectations for the Fed’s monetary policy change from time to time and the volatility of the financial market could expand.
Governor Lee also voiced concerns that the spread of Corona 19 could lead to economic inequality. He mentioned “the scarring effect of the vulnerable sector of Corona 19 (an effect that does not disappear after negative perceptions are imprinted).” “Even after Corona 19, it will act as a factor that hinders the improvement of income inequality,” and predicted that “improving inequality between sectors and classes will be difficult in a short period of time.” He pointed out that “individual adaptation to digital technology changes and gaps in educational opportunities can also lead to income inequality.”
President Lee also suggested that Corona 19 could rather act as an opportunity for innovation. He pointed out that the growth of platforms related to online shopping and delivery services will continue, but the position of offline companies may weaken.
Reporter Yoon Sang-eon [email protected]
