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South Korea elects IMF officials as new central bank governor

Changyong Rhee, director of the Asia and Pacific Department at the IMF, speaks during a session in
FILE PHOTO: Changyong Rhee, Director of the Asia and Pacific Department at the International Monetary Fund (IMF), speaks during a session at the ‘Advancing Asia: Investing for the Future’ conference in New Delhi, India March 12, 2016. REUTERS/ Anindito Mukherjee

March 23, 2022

By Cynthia Kim and Jihoon Lee

SEOUL (Reuters) – South Korea on Wednesday named veteran International Monetary Fund official Rhee Chang-yong as its new central bank governor, a choice widely expected to continue the bank’s efforts to curb inflation with aggressive rate hikes .

Rhee, currently director of the Asia and Pacific Department at the IMF, will join the Bank of Korea as Asia’s fourth-largest economy struggles with rising prices driven by supply chain problems and the war in Ukraine.

He succeeds Governor Lee Ju-yeol, whose term ends on March 31 after eight years at the helm of the bank.

Economists say that while Rhee is likely to be less hawkish than Lee, which will affect the make-up of the bank’s seven-member board, he is not expected to change BOK’s current political stance significantly.

“Looking at his past comments and reports, he is more of a dove, although he will not divulge such a stance given the current economic climate,” said Kyobo Securities economist Paik Yoon-min. “But I think that the board of the BOK could end up adopting a more reserved color.”

The BOK next reviews its policy rate on April 14, and analysts expect the board to raise the policy rate from the current 1.25% to 1.75% by the end of 2022.

Daishin Securities’ Kong Dong-rak also said Rhee is less of a hawk than Governor Lee, although “he’ll only make that clear after a few hikes.”

The BOK has hiked interest rates three times since August to ease inflationary pressures and the build-up of financial imbalances, making it one of the more hawkish central banks in the world.

The bank now says that even more aggressive rate hikes may be needed amid rising import costs and ongoing supply chain problems.

TRANSITIONS

The bank governor’s change comes amid a broader political shift in the country, with conservative President-elect Yoon Suk-yeol taking office in May, replacing outgoing leader Moon Jae-in.

Moon’s office said Monday the president discussed the nomination with Yoon, although Yoon’s transition committee released a separate statement saying the nomination had not been raised in talks.

Before beginning his four-year term, Rhee will be questioned by lawmakers about his business expertise and ethical standards.

Members of the National Assembly often attack those tapped as top officials in parliamentary hearings, although Rhee’s nomination does not require formal legislature approval.

Such hearings have historically focused on a wide range of personal matters, including nominee property transactions, tax histories, and even relatives’ military service.

As Director of the IMF, Rhee currently oversees its lending and surveillance activities in the Asia-Pacific region.

Before joining the IMF in 2014, Rhee was chief economist at the Asian Development Bank and Sherpa for the country’s G-20 Presidency Committee when South Korea hosted the group’s 2010 summit.

He has worked closely with Treasury officials, including former Deputy Finance Minister Choi Sang-mok, who is now a member of President-elect Yoon’s transition committee.

(Additional reporting by Joori Roh, Hyonhee Shin; Editing by Clarence Fernandez and Sam Holmes)

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DUSTIN JONES

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