Korea names IMF official as new central bank head

South Korea on Wednesday nominated veteran International Monetary Fund official Rhee Chang-yong as the country’s new central bank chief, who is expected to continue the monetary authority’s policy of further rate hikes to stem inflation.

Rhee, the current director of the IMF’s Asia and Pacific Department, is neither a hawk nor a dove, but he is likely to maintain the Bank of Korea’s tightening bias, given his recent remarks, analysts said.

“Continuous growth in (national and household) debt ratios due to growing liquidity could significantly affect financial markets in the future,” Rhee said in a media interview in January. “Korea needs to adjust the debt ratios through interest rate increases although it is difficult.”

In a seminar on Jan. 26, Rhee said monetary and fiscal policies should not be used to boost growth in the short term.

The BOK restored interest rates back to a pre-pandemic level with three hikes since August last year to curb rising inflationary pressure and household debt in Asia’s fourth-largest economy.

But in another media interview he also stressed the central bank should not use its policy to stem property prices, saying: “We should not repeat the mistake of mobilizing tax and interest rate policies that affect the entire economy in order to stabilize property prices in certain regions.”

Seoul National University’s economics professor Ahn Dong-hyun said Rhee is the right person to implement appropriate monetary policies to deal with current volatile inflation, market interest rates and the macroeconomic situation.

GLOBAL EXPERIENCE

Rhee is currently overseeing the IMF’s work on the Asia-Pacific region, including its lending operations and bilateral and multilateral surveillance of economies.

Prior to joining the IMF in February 2014, Rhee was chief economist of the Asian Development Bank (ADB), secretary-general and sherpa of the Presidential Committee for the 2010 G-20 Seoul Summit, vice chairman of the Financial Services Commission (FSC), and chairman of the Securities and Futures Commission of South Korea.

When Rhee was FSC vice chairman during the 2008-09 global financial crisis, he reportedly contributed to a $30 billion currency swap deal between South Korea and the US in October 2008 through his relationship with then-US Treasury Secretary Timothy Geithner, Rhee’s fellow alumnus from Harvard University.

Rhee holds a doctorate from Harvard and an undergraduate honors degree from Seoul National University, both in economics.

BOK WITHOUT GOVERNOR

Despite the nomination, Rhee is unlikely to take office right after the current chief Lee Ju-yeol ends his term on March 31 as lawmakers are set to hold a hearing to confirm his appointment.

“It looks impossible for a new governor to be inaugurated on April 1 immediately after Lee retires, given the hearing schedule,” said a BOK source.

Lee was the only BOK governor appointed after a parliamentary hearing since 2012 when the country started requiring it. It took 16 days for lawmakers to give the nod to Lee’s appointment by former President Park Geun-hye and 19 days to accept the re-appointment by President Moon Jae-in.

If the inauguration of a new governor is delayed, BOK Senior Deputy Governor Lee Seung-heon will serve as the acting governor, while Monetary Policy Board member Joo Sang-yong will be the acting chairman of the rate-setting body. The central bank is scheduled to hold the next policy meeting on April 14.

Rhee’s nomination comes amid growing tensions between the current administration of outgoing President Moon Jae-in and conservative President-elect Yoon Suk-yeol, who is set to take office in May.

Moon’s office said the president had discussed the nomination with Yoon, while his transition committee denied it. But the committee was positive on Rhee, some speculated.

Write to Ik-Hwan Kim, Jin-gyu Kang, Kyung-Mok Noh and Eui-Jin Jeong at lovepen@hankyung.com
Jongwoo Cheon edited this article.