- Terms for four of seven current members end April 20
- President Park Geun Hye must approve all new members
The Bank of Korea named four new candidates for its board as slowing economic growth and waning exports put the spotlight on monetary policy and increase pressure on the BOK to consider further cuts to borrowing costs.
The nominees are:
- Lee Il Houng, the head of Korea Institute for International Economic Policy, who was recommended by the BOK.
- Cho Dong Chul, the chief economist for state-run Korea Development Institute, who was recommended by the Finance Ministry.
- Koh Seung Beom, the Standing Commissioner of Financial Services Commission, who was recommended by the FSC.
- Shin In Seok, the head of Korea Capital Market Institute, who was recommended by the Korea Chamber of Commerce and Industry.
The candidates -- who are recommended by different organizations and serve a four-year terms -- need to be approved by President Park Geun Hye. The replace four policy makers whose terms on the seven-member board end on April 20.
“Of the names that were mentioned today, only the stance of KDI’s Cho is well known in the market as a dovish person in favor of promoting growth,” said Park Jong Youn, a fixed-income analyst for NH Investment & Securities Co. “Still, with growth and inflation not satisfactory, the current administration is unlikely to appoint a hawkish member. I expect two rate cuts within the year.”
Speaking after the announcement, Cho said: “I will try my best to make the most appropriate decision under given conditions.”
The Korea Development Institute, where Cho works, said in its 2016 economic report released late last year that monetary policy should maintain an accommodative stance as inflationary pressure will remain weak for now. It also said that exports had become a hurdle to Korea’s economic recovery.
Shin has called for more efforts on the internationalization of the won. "Legal boundaries need to be eased to internationalize the won and efforts are needed to boost real demand" for the currency overseas, he said in July last year, according to Yonhap Infomax.
Lee said at a seminar earlier this year that Korea’s traditional growth drivers like exports and the property market were slowing, and noted that household debt was a restraint to consumption.
FSC’s Koh said by phone after the announcement that Korea’s economy is in a difficult situation. He declined to comment on monetary policy.
The BOK held the policy interest rate at a record low 1.5 percent this month, unchanged since a cut in June 2015. Fourteen of 22 economists surveyed by Bloomberg see the bank cutting the rate further this year, with the rest seeing no change.
BOK Governor Lee Ju Yeol said after the March 10 rate decision that the current rate is accommodative enough and that rate cuts may have limited impact when external uncertainties are high.
The shift in board composition was one uncertain factor for the timing of a rate cut, as new members may need time to assess the economy. Among the members to leave April 20 are the hawkish Moon Woo Sik, and the dovish Ha Sung Keun, who called for the BOK to cut the policy interest rate by 25 basis points this month.
While both the central bank and government project South Korea will manage about 3 percent growth this year, economists are less optimistic, expecting 2.6 percent expansion, according to a Bloomberg survey.
Korea’s exports are projected to fall for a 15th straight month in March amid a global slowdown, while inflation is expected to remain below the 2 percent target due to cheaper oil and weak domestic demand.