SEOUL (Reuters)

South Korea’s central bank governor stated on Thursday that the pace of monetary policy easing will need to be flexible this year due to increased political and economic uncertainty.

Key Points

• “This year, conditions surrounding our economy will be more difficult than ever before,” said Bank of Korea Governor Rhee Chang-yong during a New Year’s address.
• Rhee emphasized that “monetary policy needs to be operated with flexibility and agility, as political and economic uncertainty is unprecedentedly high.”
• The pace of interest rate cuts will be flexible, as trade-offs regarding growth, inflation, foreign exchange, and household debt are expected to widen.
• At its final policy meeting of 2024, the BOK executed the first consecutive rate cut since 2009, prompted by concerns over trade risks from the incoming U.S. administration of President-elect Donald Trump.
• Rhee noted that downside risks to the central bank’s economic growth forecast of 1.9% for this year have increased, attributing this to uncertainties in U.S. trade policy and domestic politics.
• Concerning the South Korean won, which experienced a decline of over 12% in 2024—the worst year since 2008—Rhee mentioned that volatility might continue for an extended period.