We haven't spoken to you since a month or two ago.
And so much has changed, including the craze in banking turmoil that we saw
here in the US as well as in Europe. How is that affecting what's happening
in South Korea? It hasn't affected us very much directly
because our exposure to the Silicon Valley Bank was quite limited.
On the other hand, we are concerned whether the constitution will be well
contained. And so far, it looks good.
So but if those not well contained and the sudden risk of attitude globally can
affect us. But so far, it looks OK.
South Korea, such a different economy in the sense that is so digitizing, is
making it more challenging to contain those risks.
Yes, sure. Actually, this turmoil gave us a lot of
homework to do. For example, like a digital banking by
the youngsters are much more developed in Korea and the speed of the deposit
withdrawal. If similar thing happens in Korea can be
probably a hundred times faster than the United States.
So I think we have to be prepared for this at this stage.
For example, we now have to increase the level of the collaterals for the daily
settlement to prepare for that kind of things happen.
And second, in the past, when a bank is closed, for example, it may be okay to
actually disperse the deposit within a couple of days.
But at this moment. Given me the social media and the speed
probably should be a couple of hours than a couple of days.
And what kind of things the Bank of Korea to do together with the regulator
is a new form of. There are so many arrests in the global
economy, including the banking turmoil, and yet you are maintaining your
interest rates pretty high and the consensus within the board seems to be
very strong. When do you expect that to change?
Well, that really depends on to be data dependent.
We are expecting our inflation rate to go down close to 3 percent before the
end of the year. And we want to be sure whether the
expectation is correct. So as long as we are sure that our
projection is on track, then we have to think about when we are going to change
our stance. But it is still too premature to be
certain. You said premature several times before.
Do you think markets are finally getting the message?
No, actually, it is. But it is not a problem in the United
States and many other countries like Canada and Australia, who also policies
interest rate market think that they can people very soon.
The same thing happening here. Oh, investors and the market
participants think that I will position our interest rate or world people
probably within a year. But I gave a warning that still their
expectations we think our policy committee members think that the
expectations would ahead of all our expectation is that.
Oh, wait. Also, because you're perhaps worried a
little bit about the weakness of the Korean War now the worst performer in
Asia. I I'm really to not have a big concern
on the level of exchanges. What we are worrying about is actually
more like what you do, be the future pass of the oil prices
given to all people, plus decide to cut down production, whether it's going to
increase the oil prices down the road or not.
And then also, you also have to be sure what will be the mighty policy in the
United States after this Tom Keene is stabilized in the House, how soon and
how much they will raise the interest rates.
So overall, this this uncertainty is resolved.
You know, it's very hard to put focus what you gonna do?
But even with the shock announcement from OPEC plus that they will reduce
production, we haven't necessarily seen that spike in oil prices.
Not now. And it seems that even China's reopening
hasn't brought that inflationary wave that we're expecting.
So why are you so guarded against a potential spike in prices?
First of all, I think you're right in the sense that now the two views, this
production cut may increase interest with price, but on the other hand, grow
the economy because of this turmoil. Maybe slowdown may help to make the oil
price ceilings. So but this uncertainty.
So my concern is that, you know, once we post when the inflation, if the
impression passes not going down, we have to be calibrate our policies.
So I don't want to give a message that is sure that our inflation pass will go
down as quickly as we and the market is expecting.
There may be, but they mean the. Not so I want to give a warning that we
have to really see more data. It's like you're trying to get
ammunition in order to have to fight potential inflation in the future at
three and a half percent interest rate. Is that enough ammunition?
I think we are in a restrictive area. So.
So. And also the.
We have raised our rate 300 piece in the last one and half years.
So it's a good time for us to assess what kind of impact you'll have when the
inflation pass. So that is one of the reason why you
pause. But on the other hand, I don't give a
message that this level is restrictive enough for automatically to reduce
inflation, because there are a lot of other things you have to consider, such
as? Such as oil prices mentioned.
And then also the the US monetary policy, which may have affect our
exchange rate, which affect our inflation.
So we have a lot of things to consider, but you seem to be focusing disease more
on core prices despite the fact that you see oil and food prices are important.
Yeah, yeah. There are two things I think we have
first of all. Our target is a CPI cell.
So we have to really look at the consumer price index.
And also because even though the CPI goes down, particularly because of the
labor effect of the oil price itself. But on the other hand, you know, how
persistent the core inflation will be is another concern.
The speed at which central banks around the world and not just to be OK has
tightened seems to be very fast and also a little bit later than it should have
been. Will there be side effects?
Oh yeah. I think you see that.
You know, what you have seen in the United States and Swiss is one example
of something can break down during this process.
And we are also watching very closely how we can have.
We do not break down something unexpectedly.
And at this moment, given that the rapid increase of interest rates globally, I
think many of my colleagues in the Central Banking Society now maybe
thinking that this a time for us to think about how long we have to stay
rather than how fast we have to continue to increase.
So we'll see. Governor, before I let you go, you know
that every time that Nokia releases a statement, we look for every single
warhead and every single change you phrase.
How will you signal to the markets when you're changing direction?
And what should I be watching out for? I think we will definitely convey to how
we interpret the data. So we actually enhance our
communications. So as soon as I think we see some signs
that some new developments which make us be certain that the information is
converging to our target rate 2 percent, then I will definitely convey to the
market how by talking to you first by your reserve that interview me.
Thank you so much, Governor.