Bank of Korea (BOK) Monetary Policy Board members are failing to communicate adequately on monetary policy, critics say, as volatility in global financial markets widens amid geopolitical tensions in the Middle East and inflation concerns. Unlike senior officials at major central banks who communicate frequently with markets through public speeches, many of the board members' external activities are difficult for the market to track in advance or afterward.
According to the "Status of Monetary Policy Board Members' External Activities" submitted by the BOK to the office of Rep. Chung Il-young of the Democratic Party of Korea on the National Assembly's Strategy and Finance Committee, the external activities of five board members, excluding ex-officio members, totaled 288 cases last year, about double the 143 cases of the previous year. The figure for board member Lee Soo-hyung rose the most, from 24 to 70, followed by Chang Yong-sung with 59, Kim Jong-hwa with 57, Shin Sung-hwan with 55 and Hwang Geon-il with 47.
While external activities increased, public communication was limited. Of the 101 lectures and seminars by board members last year, 57 were external events excluding internal BOK functions. Of these, only 13 events, or 22.8 percent, had their attendance and schedules disclosed in advance. For the remaining 77.2 percent, market participants found it difficult to confirm in advance.
Even disclosed events were often aimed at a limited audience. Full transcripts, key contents and after-the-fact records were also mostly not made public.
As the Monetary Policy Board meets only eight times a year, board members' public remarks serve as an important signal for the market to gauge their views on the economy and prices and the policy direction. But with exchange rates, oil prices and geopolitical risks shifting frequently, such a communication gap inevitably increases uncertainty over monetary policy.
Analysts say last year's domestic interest rate turbulence was not unrelated to this. A "shift in direction" remark made by former Governor Rhee Chang-yong in a Bloomberg TV interview was interpreted as a possible rate hike, and the yield on 10-year government bonds exceeded the 3 percent level for the first time last year, sharply shaking the bond market. Critics say that if other board members' views on the economy and prices had been presented in a complementary manner through regular public remarks, the shock of such changes being suddenly absorbed by the market would have been reduced.
Major central banks abroad actively use public communication. The U.S. Federal Reserve discloses policy remarks and speeches by senior officials, except during the "blackout" period before and after monetary policy meetings. Full transcripts of lectures by Fed Governor Christopher Waller, who attended the BOK International Conference last year, and European Central Bank (ECB) Executive Board member Isabel Schnabel, who attended this year, were also released on the day of the events.
"Monetary Policy Board members are public decision-makers who receive compensation of more than 300 million won a year," said an economics professor who requested anonymity. "Just as important as deciding the base rate is explaining the basis for that judgment and their economic perceptions to the market."
