This year's first interest rate decision...Economy vs. Exchange Rate, What's the Bank of Korea's choice?

BOK Ahead Of First Rate Decision This Year...The view is 'in the fog'
U.S. Trump policy variables hit martial law
Uncertainty is greater than last year's last rate decision, and the
won-dollar exchange rate is high, and the price burden...The Bank of Korea is struggling ↑

[Anchor]
The Bank of Korea will announce its first benchmark interest rate of this year tomorrow (16th).

Attention is focusing on where the central bank, which is struggling amid the economic downturn and currency instability, will decide.

I'm reporter Lee Hyungwon.

[Reporter]
The outlook for the first benchmark interest rate this year is foggy.

In a situation where it is difficult to gauge the intensity of policy that the Trump administration will put forward with U.S. priority,
This is because the unprecedented emergency of
has hit our economy.

The internal and external uncertainties considered in the last interest rate decision last year have increased.

[Lee Chang-yong / Governor of the Bank of Korea (November last year): It was a more difficult decision than ever because there have been many changes at home and abroad since Tongbang (determining the direction of monetary policy) in October, and both cuts and freezes have advantages and disadvantages.]

Considering the economy, the recession is deep enough to have to lower interest rates right away.

Export outlook darkens around semiconductors,
As consumer sentiment is frozen due to the aftermath of the
martial law, there are even concerns that the growth rate could only be in the mid-1% range.

[Ju Won / Head of Economic Research at Hyundai Research Institute: Domestic demand is very bad. I have to show foreign investors that fiscal and monetary policies are actively moving because I see the Korean economy quite uneasy from the outside. Even in that sense, a rate cut is essential this time.]

The problem is the won-dollar exchange rate, which is soaring around 1,470 won.

The high exchange rate will raise consumer prices following import prices, which will inevitably deepen the BOK's worries about stabilizing prices.

In particular, as the U.S. interest rate outlook has increased this year, if we only lower it, the difference in interest rates between Korea and the U.S. will be bigger, which could encourage the high exchange rate.

[Cho Young-moo / Researcher at LG Management Research Institute] The won-dollar exchange rate, which remains high, changes in U.S. monetary policy, which is not expected to fall faster or much lower than expected. These external factors weigh on the Bank of Korea's further rate cuts....]

Amid tight cuts weighing on economic stimulus and need to freeze 3% annual interest rate to stabilize exchange rate

This time, Bank of Korea Governor Lee Chang-yong is expected to make the most difficult decision since taking office.

I'm Lee Hyungwon of YTN.


Video editing: Lee Jung-wook
Design: Kim Jin-ho