[Editorial] Deputy PM Han's Comments Go Too Far

Comments by Deputy Prime Minister for Finance and Economy Han Deok Su about money rates have reached dangerous levels. Last month he said that the "trend towards economic recovery isn't strong enough and therefore low interest rates must be maintained." The day after he said that he announced there "will absolutely be no increase in interest rates." He even went so far as to say that "market players who are hoping for higher interest rates are going to suffer loses."

It is the Bank of Korea (BOK) that is responsible for monetary policy, not members of the executive branch. BOK's finance and monetary committee determines the goal for call rates. The reason BOK is given independence is to maintain balance with the executive branch, which always wants to lower interest rates to stimulate the economy. There is always room for policy to be influenced by the government, however, since it has influence over the selection of members of the committee. That is why government officials who go on saying this or that about interest rates are criticized in the media.

Listening to Han's comments it looks as if he does not care the least about public opinion. He talks about interest rates frequently and unreservedly. A few days ahead of this week's committee meeting he went beyond his authority by declaring that there would "absolutely" be no changes. He talked as if he is in communication with the BOK, saying that its chairman agrees with him, and that is just as inappropriate. He could cause serious misunderstanding. It is as if he said the deputy prime minister and the BOK chairman determine monetary policy and the committee just acts as rubber stamp. His warnings for the market are also irresponsible. Is he going to compensate people who lose money on the market after they act on what he tells them only to have the committee raise interest rates? One understands how he must feel pressure about economic recovery, but there are ways to go about that. Furthermore, this is a time when stabilizing the real estate market is an issue of great urgency. Raising interest rates is a powerful policy tool, and it is wrong to exclude it altogether as a possibility.

The Hankyoreh, 4 July 2005.

[Translations by Seoul Selection (PMS)]