Lee Hyoung-il–Hyun Song Shin: "Household burdens persist... Close communication on monetary and economic policies"

[Financial News]  The Ministry of Economy and Finance and the Bank of Korea agreed to strengthen cooperation to ensure stability across the macroeconomy, including prices and financial markets. The two institutions plan to activate various communication and cooperation channels, including expanding their existing market conditions review meetings.
On the 28th, Deputy Prime Minister and Minister of Economy and Finance Lee Hyoung-il visited the BOK in Jung-gu, Seoul, and met with Governor Hyun Song Shin.
Previous economic deputy prime ministers visited the BOK after taking office to strengthen cooperation, but this meeting was held swiftly, just six days after Lee took office. Despite growth in macroeconomic indicators driven by the semiconductor boom, volatility in the financial and foreign-exchange markets has increased, while polarization and uncertainty have deepened. The meeting is seen as an effort to quickly signal to the market the commitment of the heads of economic and monetary policy to close cooperation.
There also appears to have been an effort to dispel concerns about policy discord arising from a clash between the government's 'super-expansionary fiscal policy,' funded by semiconductor tax revenue, and the BOK's preemptive monetary tightening, including two consecutive base-rate hikes. If the government injects money into the economy to stimulate aggregate demand, inflationary pressures will increase and the effectiveness of monetary tightening will decline.
Lee and Shin agreed that although economic indicators such as exports and investment were performing well, burdens on households and livelihoods were continuing amid heightened external uncertainty, including rising interest rates in major economies and geopolitical risks.
They also agreed on the need to assess conditions across the economy—including finance, foreign exchange and real estate—rather than focusing solely on macroeconomic indicators, and to respond proactively to risk factors.
Lee proposed, "To achieve our shared goals of price stability, growth and financial stability, let us strengthen the cooperation framework for integrated monitoring and early responses in the financial, foreign-exchange and asset markets through closer communication between the two institutions."
Lee also stressed that the two sides should work together on future challenges such as internationalization of the won and digital finance, while exploring ways to raise potential growth and spread the benefits of growth.
"It is important to note that an exceptional increase in income resulting from economic growth could heighten inflationary pressures and increase financial imbalance risks," Shin said.
Referring to the BOK's recent base-rate hike as a preemptive monetary policy measure, Shin emphasized, "I believe it will help strengthen the fundamentals of the domestic economy by controlling demand-side inflationary pressures while stabilizing the exchange rate and easing cost pressures."
"To establish a foundation for sustainable growth, stability across the macroeconomy through price and financial stability must come first," Shin said, adding that the two institutions should maintain close communication and cooperation to achieve that goal.

[email protected] Jung Sang-kyun Reporter