Rhee Chang-yong, governor of the Bank of Korea (BOK), said it is still too soon to be relieved even though the won-dollar exchange rate has recently fallen, as individual overseas investment flows are continuing. He also assessed that additional policy measures are needed for the recent decline in home prices to become prolonged.
Rhee said this at a press conference on the monetary policy stance held immediately after the Bank of Korea's monetary policy committee kept the benchmark rate unchanged at 2.5% on the 26th.
Regarding the recent exchange rate trend, Rhee said, "The won-dollar exchange rate has fallen considerably," adding, "That is because the National Pension Service announced it would reduce the size of its overseas investments by more than $20 billion, which greatly weakened expectations for a rise in the exchange rate." He said, "This decision spread the perception that the rate would not climb into the 1,500-won range, and as corporations that had been depositing dollars (at banks) put their holdings on the market, the rate fell."
However, he said, "It is still too soon to be relieved about the exchange rate." Rhee said, "Outflows from the National Pension Service and corporations for overseas investment have decreased considerably, but individuals' overseas investments are continuing," adding, "Even through mid-Feb., they were made on a scale similar to Oct.–Nov. last year, burdening the supply and demand in the foreign exchange market."
He also took a cautious stance on the real estate market. Rhee said, "Rising home prices have slowed due to government measures, but additional policies are needed for this shift to lead to long-term stability."
He said, "Macroprudential policies that manage demand, the supply of dwellings, and tax policies must be pursued together." He went further to say, "The concentration in the greater Seoul area must also be eased," pointing out, "Otherwise, it will be difficult to fundamentally resolve the issue no matter how many dwellings are supplied."
Meanwhile, the Bank of Korea (BOK) released its revised economic outlook along with the rate decision that day. The Bank of Korea (BOK) raised this year's growth forecast to 2% from 1.8% and lowered next year's growth to 1.8% from 1.9%.
Regarding this, Rhee said, "This year's growth is likely to be higher than expected for exports and facility investment thanks to a favorable semiconductor cycle and solid global growth," adding, "However, next year, growth will be smaller as the increase in export volumes slows moderately."
Regarding U.S. tariff policy, he said, "With the U.S. government's temporary tariff measures, Korea is expected to maintain the same tariff rate as before," assessing, "So far, the impact on growth is limited." He added, "However, the impact could vary greatly depending on whether tariffs are imposed by item going forward."