Seoul: The Bank of Korea (BOK) announced on Monday that its three-month policy rate outlook has successfully influenced market expectations and reduced volatility. The central bank is now contemplating extending its forecast horizon to enhance policy predictability.

According to Yonhap News Agency, the BOK shared its assessment during a monetary policy conference in Seoul. The bank is considering ways to extend its forward guidance outlook to improve the predictability of policy rate decisions. Kim Byung-kuk, head of the policy coordination team at the BOK's Monetary Policy Department, stated that the three-month interest rate outlook has positively shaped market expectations and eased volatility in market interest rates.

Kim noted that the forecast horizon is shorter compared to those used by major economies or dot-plot systems. Since July last year, the BOK has been exploring various approaches, including presenting multiple rate projections within a one-year horizon.

Currently, BOK Governor Rhee Chang-yong shares the distribution of Monetary Policy Board members' views on the policy rate outlook three months in advance by answering questions at press briefings following rate-setting meetings. In his speech at the conference, Rhee highlighted the central bank's challenges in identifying appropriate monetary policy tools amid market uncertainties, policy variable clashes, and advancements in financial digitalization.

Rhee mentioned that the central bank is in a transitional phase of reassessing how to provide more information to the market effectively. He emphasized that while the BOK has pursued institutional changes related to monetary policy, further tasks remain to enhance policy effectiveness.