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Finance minister, BOK chief vow to tackle market uncertainties

Dec. 17, 2016 - 10:15 By 김윤미

The country's chief economic policymaker and the head of the central bank Friday agreed to take measures to tackle market uncertainties, if necessary, which stem from the impeachment of President Park Geun-hye and the much-expected rate hikes in the US.

Finance Minister Yoo Il-ho and Bank of Korea Gov. Lee Ju-yeol also shared the view that a policy mix is increasingly important to help Asia's fourth-largest economy grow.

Bank of Korea Governor Lee Ju-yeol (left) and Finance Minister Yoo Il-ho. (Yonhap)

During their meeting, the first in a year, they discussed how to deal with pending economic and financial issues.

"Due to the toughened economic situation, cooperation between the finance ministry and the central bank has become more important," said Yoo, who also doubles as deputy prime minister for economic affairs. "The two agencies have to join hands to tide over the difficulties."

Gov. Lee also agreed to strengthen cooperation between the fiscal and monetary authorities.

"The government and the BOK have to focus on stabilizing the financial and foreign exchange market," he said. "South Korea has enough capability to keep the financial market stable, and we are ready to take action if necessary."

The Yoo-Lee meeting came as the country's economic policies are feared to go adrift amid political chaos sparked by the parliament's vote to impeach President Park.

Following the impeachment earlier this month, Prime Minister Hwang Kyo-ahn stood in as president. Hwang decided to retain Yoo as the finance minister to maintain policy consistency, despite calls from the opposition parties to replace him.

Their meeting also came as the US Federal Reserve hinted at accelerating its rate hikes next year following this week's one, which could lead to capital outflow from the local financial market, and destabilize the currency market.

In order to pump-prime Asia's fourth-largest economy, which is struggling with faltering exports and lukewarm domestic demand, the finance ministry is widely expected to reaffirm that the government will maintain its expansionary stance throughout next year.

Earlier this week, the finance minister hinted at drawing up a supplementary budget in the first half of next year, if necessary.

The finance ministry is set to unveil its 2017 policy plan slated for Dec. 28., under which the government will likely revise down its earlier growth estimate of 3 percent.

Experts said that the finance ministry wants the central bank to keep the low-rate trend for a while despite rising pressure to take tightening mode in accordance with higher US interest rates.

The Korea Development Institute, a state-run think tank, earlier suggested the central bank cut the base rate further to keep pace with the finance ministry's expansionary fiscal policies.

On Thursday, the central bank kept its policy rate steady at 1.25 percent for December.

Meanwhile, the country's economy will remain stable despite political uncertainties following the parliament's impeachment of President Park over a corruption scandal, the BOK chief said during a meeting with a visiting British minister.

"South Korea's financial markets and the real sector economy could remain stable, as the government has enough room for monetary policy tools and closer cooperative ties have been forged between related authorities," Lee said in a meeting with Britain's Finance Minister Philip Hammond. (Yonhap)