Bank of Korea Governor: "If Exchange Rate Stays at 1430 Won, Inflation Rate Will Rise by 0.05%p"

Changyong Rhee, Governor of the Bank of Korea, stated, "If the exchange rate remains at the 1430 won level, the inflation rate is expected to rise by 0.05 percentage points."

Governor Rhee mentioned at the price stability target operation status briefing on the 18th, "We forecast next year's consumer price inflation rate to be 1.9%, so it is expected to be around 1.95%, which means the impact is still limited."

He explained, "Currently, the inflation rate is below 2%, and in the current situation, we are more concerned about the impact of exchange rate changes on financial stability or sentiment rather than on prices."

Regarding the recent increase in exchange rate volatility and government intervention, he said, "We are determined to mitigate volatility decisively without targeting a specific exchange rate level."

Governor Rhee added, "We have managed to reduce volatility to some extent without intervening in large quantities," and stated, "It is not desirable to make predictions about future exchange rate movements."

He evaluated, "Right after the martial law, exchange rate volatility increased, leading to several interventions and smoothing operations (fine-tuning), and now it seems to have stabilized, moving along with the overall dollar movement."

He further stated, "If volatility increases in the future, we will continue smoothing operations," and added, "Our foreign exchange reserves are not below 400 billion dollars, nor below 410 billion dollars."

Noh Jeongdong, Hankyung.com reporter dong2@hankyung.com