SEOUL, March 31 (Reuters) – Shin Hyun-song, nominee for the governor of the Bank of Korea, said on Tuesday that monetary policy needed to be “flexible” to deal with rising risks from the Iran war.
“It is undesirable to simply define one as a hawk or a dove,” Shin said at a meeting with reporters. “It is most desirable to respond flexibly depending on the situation.”
Shin said the crisis in the Middle East was the biggest risk to Asia’s fourth-largest economy, adding that the government’s plan for an extra budget was needed for low-income people hit by financial difficulties due to the Iran war.
Still, inflationary pressure from the extra budget would be limited, he added, given the design and the scale of the plan.
Shin also said he was not concerned about foreign exchange rates themselves, because liquidity conditions remain solid, as the won touched its weakest level since March 2009 on Tuesday at 1,528.6 per dollar.
The BOK held interest rates steady last month and signalled policy would stay unchanged until August, as a chip boom in exports and steady inflation allowed policymakers more time to assess financial stability risks.
Shin, head of economic department at the Bank of International Settlements (BIS), was appointed last week by President Lee Jae Myung as nominee to lead the central bank. He will go through a hearing at the parliament before taking office.
(Reporting by Jihoon Lee and Heejin Kim; Editing by Himani Sarkar and Sam Holmes)
