BOK Said to Have Met Economists to Improve Communication Lines
The Bank of Korea called in economists on Monday to discuss communication on monetary policy, after catching them off guard earlier this month when it cut the benchmark interest rate to a record low.
Officials including Deputy Governor Yoon Myun Shik and Director General Huh Jin Ho spent two hours with six economists from financial companies and universities, talking about what the BOK could do better to telegraph its intentions, according to two people who were present at the meeting. A spokesman for the central bank declined to comment on the matter.
Only two of 17 economists surveyed by Bloomberg predicted the cut in the seven-day repurchase rate to 1.75 percent on March 12. The BOK is among about two dozen central banks to ease monetary policy so far this year, with many of the moves unexpected by economists.
“The reason the BOK has been criticized isn’t because of a lack of signaling, but because it has been giving the wrong signals,” said Park Jong Youn, a fixed-income analyst for NH Investment & Securities Co. in Seoul. “The central bank isn’t a fortuneteller.” Park wasn’t at the meeting on Monday.
Yoon told economists at the meeting on Monday that the rate cut came as data deteriorated more than expected, and as the central bank weighed financial stability and growth, according to one of the people, who asked not to be named because the gathering was private.
In a report to parliament in February, the BOK said it would increase the transparency and predictability of monetary policy by establishing communication advisory meetings with academics and market participants. The gathering on Monday was the first such meeting, said the two people.
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On Jan. 15, the BOK lowered this year’s growth forecast to 3.4 percent from 3.9 percent, and reduced its inflation projection to 1.9 percent from 2.4 percent. Then on Jan. 22, Governor Lee said that the central bank was “not pessimistic” about growth in 2015.
At a briefing on March 12 after the rate cut, Lee said “this year’s growth will not reach the projections made in January.”
He said on Tuesday that the BOK was aware of criticism that it hadn’t signaled its intentions clearly enough.
Some participants at the gathering on Monday said the BOK needed to enhance communication on its economic forecasts, with one suggestion for the central bank to provide policy guidance on the rate outlook in minutes from its policy meetings, one of the people said.
E-daily reported earlier on Tuesday that BOK officials had met economists on Monday.
Source: Bloomberg – BOK Said to Have Met Economists to Improve Communication Lines
