Seoul: South Korea's top central banker on Wednesday emphasized the urgent need for economic stimulus to support recovery but warned of "serious side effects" if the government relies too heavily on such measures. Bank of Korea (BOK) Gov. Rhee Chang-yong made the remarks during a speech at a ceremony marking the 75th anniversary of the central bank's founding in Seoul.

According to Yonhap News Agency, Rhee highlighted the necessity of economic stimulus to aid recovery under current circumstances. However, he stressed that efforts must be made to prevent a continued decline in growth potential and to construct a resilient economic framework capable of withstanding cyclical fluctuations. He cautioned that excessive reliance on stimulus measures could result in significant side effects in the future.

His comments coincided with the new Lee Jae-myung administration's efforts to develop a supplementary budget aimed at supporting livelihoods and stimulating growth. The BOK plans to maintain an accommodative monetary policy for now, but Rhee warned that excessively lowering the key interest rate could inflate real estate prices in Seoul, rather than effectively boosting the real economy.

The governor also expressed concerns about potential volatility in the foreign exchange market, particularly if the interest rate gap between South Korea and the United States widens amid ongoing uncertainty over trade negotiations related to the Donald Trump administration's tariff policies. Late last month, the central bank reduced its benchmark interest rate by a quarter percentage point and significantly cut its 2025 real gross domestic product (GDP) growth forecast from 1.5 percent to 0.8 percent.