Seoul: New Bank of Korea (BOK) Governor Shin Hyun-song on Tuesday pledged to adopt a cautious and flexible monetary policy in response to the ongoing crisis in the Middle East, which has heightened global uncertainties. As he began his four-year term, Shin emphasized the need for a prudent approach to monetary policy, succeeding outgoing Governor Rhee Chang-yong.
According to Yonhap News Agency, Shin underscored the dual impact of rising global oil prices, which are simultaneously exerting upward pressure on inflation and downward pressure on economic growth. He noted that the volatility in financial markets and risks of accumulating financial imbalances persist. "Given the uncertainty in inflation and growth paths, monetary policy should be conducted in a cautious and flexible manner to ensure stability in prices and financial markets," Shin stated in his inauguration speech. He highlighted the world's ongoing "major transformation" due to geopolitical tensions and the artificial intelligence (AI) revolution, and pointed to weakening growth momentum as key concerns amid demographic changes, deepening polarization, and challenges in the real estate market and household debt.
Shin stressed the difficulty of identifying and responding to risks in the financial system using existing frameworks. He announced plans to reassess policy tools to address complex trade-offs among policy variables and to enhance early warning capabilities using market-based price indicators. The BOK recently held its benchmark interest rate steady at 2.5 percent, marking the seventh consecutive decision to keep rates unchanged, despite the escalating regional crisis following U.S.-Israeli strikes on Iran in late February.
Shin previously described the decision to maintain rates as an exercise in "strategic patience," noting that it was "too early" for decisive action. He also outlined priorities such as internationalizing the Korean won, strengthening its global position in the digital payments environment, and enhancing the use of central bank digital currency (CBDC) and deposit tokens.
Additionally, Shin expressed his commitment to conducting in-depth research and policy recommendations on structural reform, deeming it crucial for monetary policy operations. During a meeting with reporters, he apologized for public concerns arising from his confirmation hearing process, which was marred by controversies over his property holdings, his family's nationalities, and other personal matters.