chang yong rhee : speech - korean economic associations annual meeting speech by mr chang yong rhee, governor of the bank of korea, at the opening dinner of the korean economic associations annual meeting, seoul, 13 february 2024. * * * chairman yoon - jae whang of the korean economic association, vice chairman hongkee kim, esteemed presidents of various economic societies who are hosting this joint academic conference, and distinguished guests, i would like to express my gratitude to you for inviting me to this congratulatory dinner celebrating the 2024 korean economic associations annual meeting. i am also thankful to the many professors here who have provided significant assistance to the bank of korea over the years through a wide range of research and consultations. it would be difficult for me to pretend to be knowledgeable about the topics that have recently been of primary interest across academia, as it has been a long time since i quit my professorship at the university. instead, i would like to present five topics related to monetary policy issues that i have encountered while working at the bank of korea over the past two years, in lieu of my dinner speech, hoping that academia and the bank of korea will be able to find solutions together. conditional forward guidance the first topic is " conditional forward guidance. " recently, the bank of korea has been explaining the views of monetary policy board members on the policy rate over a three - month horizon. in the media, this is referred to as the " bok's dot plot. " it is considered to be a new attempt, departing from the tradition of maintaining as much " strategic ambiguity " as possible, by not clearly mentioning any future interest rate policy. there may be disagreement regarding which communication strategy will be more desirable for the korean economy, between forward guidance and strategic ambiguity. on the one hand, there is concern about the possibility that market volatility may increase if the future policy path is clearly outlined but then the policy changes in a different direction due to sudden shifts in economic conditions and outlook. on the other hand, there is the contrasting opinion that if the central bank effectively convinces economic agents that policies may change in response to changes in the assumptions underlying the forecasts, they may adapt more proactively to changes in economic conditions, leading to market stabilization. the bank of korea is planning to announce major economic forecasts quarterly starting in the second half of this year, instead of semiannually. given this situation, we are currently considering whether it is desirable to further develop

to focus on carrying out from the second half of this year. as inflationary pressures on the demand side are still not high, while the domestic economy is expected to continue its solid growth, we will need to maintain our accommodative monetary policy stance. in this process we will however have to consider the facts that the financial imbalances can grow, and, from a longer term perspective, that we need to increase our monetary policy operating capacity to respond to fluctuations in business cycles. from this standpoint, we will have to carefully judge whether it is necessary to adjust the accommodative monetary policy stance further, while closely checking future economic growth and inflation trends, changes in the monetary policies of major countries and the consequent financial stability conditions. in the second half of this year we will have to consider the inflation target to be applied from next year. the way in which the inflation target is set, and the method by which it is operated, have 1 / 3 bis central bankers'speeches direct effects on the central bank ’ s credibility and on whether economic actors ’ inflation expectations are securely anchored. we will have to closely analyze whether there have been any structural changes in the underlying price flows, and in the relationship between growth and prices, and properly set the inflation target and the period for re - examining it. we will also have to look whether there are any areas that need improvement in how we fulfill our responsibilities for explaining policy. we will need to strengthen our efforts aimed at enhancing the effectiveness of our policy communication. when uncertainties are high the markets can react sensitively to even small changes in economic conditions, or even to a single word from the policy authorities. it can thus be said that a meticulous communication strategy is demanded, to ensure that consistent communication concerning our policy directions can be achieved. we will also have to devote special attention to financial stability. financial and foreign exchange markets in some emerging markets with weak fundamental conditions have experienced unease recently. given korea ’ s favorable external soundness it is unlikely that the financial unrest in these countries will spread to affect us. but if overseas risks, from the monetary policy normalizations in major countries and strengthening protectionism for example, materialize simultaneously we will be unable to accurately estimate their effects. we will therefore have to watch even more carefully any changes in these risks. we can also not afford to be negligent in our research on and our responses related to new issues in economics. we will need to strengthen our