the bank of korea new year speech january 2, 2017 juyeol lee governor the bank of korea dear fellow members of the bank of korea, today is our first day of work in 2017, and i would like to begin by expressing my sincere appreciation to all of you, for so faithfully carrying out your duties last year. at the opening ceremony for each new year, we always resolve to show renewed spirits of determination, but this year i think even more extraordinary resolutions are called for than in the past. looking back on the past year, a series of unexpected shocks at home and abroad caused our economy great difficulties. at the beginning of the year factors such as economic unrest in china, the further decline in international oil prices and uncertainties as to the timing of the policy rate hike by the us federal reserve kept us awake. after that the brexit vote in the uk, the presidential election in the us and political uncertainties at home arose as additional destabilizing factors. as a result of this series of events, our financial and foreign exchange markets were hit by high volatilities, and economic sentiments weakened sharply. against this backdrop, in order to support the recovery of our economy ’ s growth the bank of korea eased its monetary policy stance further. in march of last year we raised the total ceiling of the bank intermediated lending support facility greatly, and in june we cut the base rate to 1. 25 % per annum. moreover, while closely monitoring the financial and foreign exchange markets at home and abroad, we worked actively to stabilize the markets whenever factors causing instability arose. - 1 - despite these efforts, however, our country ‘ s economic growth still fell short of its potential last year. consumer price inflation also remained considerably below the target. the trend of high growth in household lending continued as our accommodative policy stance became prolonged, and concerns grew about the possibility of household debt causing a contraction in consumption and undermining financial stability. dear members of the bank of korea, this year our economy is expected to maintain its modest growth, thanks to the strengthening somewhat of the global economic recovery. if we look around, however, at conditions here at home as well as abroad, there are potential risk factors lurking everywhere that could limit the pace of growth. first of all, as the movements toward strengthened protectionism in major countries become more evident, it is possible that world trade could contract. uncertainties concerning the policy directions of the new us administration, the rate

when carrying out our monetary policy this year, we should devote particular attention to financial stability. as the possibility of expansions in financial and fx market volatilities is high, we will have to carry out stabilization measures actively as needed, while closely monitoring the trends of price variables and capital flows. the upward pressures on market interest rates, which have grown in consequence mainly of the rate hikes by the us federal reserve, could aggravate households ’ debt repayment burdens. we thus need to work, in close consultation with the government and the supervisory authorities, to ease the trend of sharply rising household debt and to prevent the risks of default among the vulnerable groups from escalating. we must also redouble our efforts to enhance the effectiveness of our monetary policy, and most importantly to increase the accuracy of our economic forecasts. we should devote efforts to continually improving our forecasting model, to using new - 4 - technologies such as big data, and to expanding the number of our specialist staff. at the end of last year we released the “ general principles of monetary policy operation, ” and resolved to push ahead with improving the contents of the monetary policy statement from the monetary policy board meeting as well as expanding the scope of related reports released to the public. these efforts will heighten the predictability of our monetary policy and thus contribute to enhancing its effectiveness. we will need as well to respond actively to the digital revolution in the payment and settlement field, which is progressing rapidly. through cooperation with the financial sector, and with it specialized enterprises, we will need to establish a foundation facilitating the wider use of fintech, distributed ledger technology and biometric authentication. while on the one hand working to support the smooth launch and settlement into place of internet banks, we should at the same time push ahead without delay on the pilot program exploring introduction of a “ coinless society ”. central banks of major countries are carrying out in - depth research recently on digital currencies, and we too should begin research on the forms of issuance of, the technical framework for, and the effects on monetary policy and financial stability of digital currencies. as community the has korean risen, economy ’ s its status in the international engagement in external financial cooperation is becoming more important, and the bank of korea is for example now expected to take on a strengthened role in international organizations. in responding to this, we need to implement our organization and personnel management in a way that supports improved specialization for these tasks