SEOUL, April 21 - South Korea's newly appointed central bank governor urged a careful and adaptable approach to monetary policy on Tuesday, describing heightened uncertainty over inflation and growth as a consequence of supply disruptions linked to the Middle East conflict.
In his inauguration address, Governor Shin Hyun-song said the supply shock caused by the war in the Middle East has expanded uncertainty about both inflation and growth trajectories. He told attendees that these conditions require the central bank to pursue price stability and to safeguard financial stability through 'cautious and flexible monetary policy operations.'
Shin pointed specifically to a rise in oil prices associated with the Iran war, saying the increase is exerting upward pressure on inflation at the same time as it is depressing economic growth. He also noted heightened volatility in financial markets and described accumulating risks to financial stability as important considerations for policy.
Shin began his four-year term as governor of the Bank of Korea on Tuesday. He is scheduled to chair his first policy meeting on May 28, where the central bank's stance will be considered in the context of the factors he highlighted in his remarks.
The governor's comments framed the central bank's immediate priority as balancing competing pressures - containing inflationary forces while limiting further harm to growth - and doing so with an operational approach that emphasizes caution and flexibility given the current degree of uncertainty.
Context and implications
Shin's emphasis on both price stability and financial stability underscores the dual concerns the central bank faces: higher energy costs that feed inflation, and the risk that those same cost shocks will weigh on economic activity. The combination of upward inflationary pressure and downward growth pressure, alongside volatile markets, sets a challenging backdrop for the Bank of Korea's near-term decisions.
With the governor taking the reins at the start of a four-year term and convening his first monetary policy meeting in late May, markets and financial institutions will be watching for how that balance is translated into policy action and communication.