S.Korea names new c.bank chief, seen close with government

By Yoo Choonsik

SEOUL (BestGrowthStock) – South Korea appointed on Tuesday as the new central bank chief its OECD envoy, who has suggested he would work closely with the government, reinforcing views that rates will remain at a record low for some months to come.

Kim Choong-soo, 62, had been seen as an outside choice for the job with most media speculation focusing on a close aide to President Lee Myung-bak, but he has over past several days emerged as one of the most likely candidates.

Unlike outgoing governor Lee Seong-tae, a 40-year central bank veteran, Kim has never worked at the Bank of Korea, which analysts said suggested he would be more coorperative with the government in managing policy.

“The Bank of Korea is also (part of) the government. It does not look appropriate that the Bank of Korea does not cooperate with the government.” Kim told a local radio station last week.

That is in contrast to Lee, who has emphasized more the importance of the central bank’s independence.

Kim also said that the authorities needed to take a more cautious approach on removing stimulus measures than resource-rich economies because Korea relies so heavily on exports.

Analysts said the announcement, which came after markets had closed, suggested the Bank of Korea would probably keep the policy rate at record-low 2.0 percent level — where they have already been for 13 straight months — until late this year.

“As expected, a pro-government candidate has been picked for governor. The central bank is accordingly expected to maintain eased monetary policy for a long period of time,” said Yu Jae-ho, a fixed-income analyst at Kiwoom Securities.

“We put off the estimated timing and range of a base rate rise after today’s announcement,” he added.

Analysts have been scaling back expectations of a rate hike to later in the year following repeated calls by the government to keep rates low so as not to derail the economy.

Kim, who has worked as an economist in South Korea and the United States, also served as an adviser to President Lee since soon after Lee took office in early 2008 and as an aide to the finance minister in the 1990s.

GOVERNMENT CALLS

Outgoing governor Lee, whose term ends on March 31, has served at the central bank throughout his career and at times sounded out of step with the government over the timing for an exit strategy.

The government of President Lee, who rose to power in early 2008 with very ambitious economic growth promises, has publicly said the central bank should wait more before starting to raise interest rates.

It started sending a representative to the central bank meetings for the first time in a decade in January.

A leading local newspaper on Monday quoted Finance Minister Yoon Jeung-hyun as saying interest rates need to be left at record lowS at least until November, when the country will host the G20 summit meeting.

Kim will start his four-year term on April 1 and his first major event will be presiding over the monetary policy committee meeting to set interest rates on April 9.

The Organization for Economic Co-operation and Development (OECD) expects South Korea’s economy, the fourth-largest in Asia, to post the fastest growth among its 30 members this year.

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(Additional reporting by Jack Kim and Cheon Jong-woo in SEOUL, Kevin Yao in SINGAPORE; Editing by Kazunori Takada)

S.Korea names new c.bank chief, seen close with government