Citing U.S. Fed, Central Bank Makes Case for Independence

The Bank of Korea said Wednesday that the government should refrain from intervening in the nation's financial market and the central bank's monetary policy.

In a report titled "How is the Bank of Korea different from the Federal Reserve Board of the United States?" the bank asserts that the Federal Reserve's independence is respected because it is completely insulated from the power of the U.S. government. It also says that the U.S. administration does not have the authority to revoke the Fed's policy nor control of its personnel policies and budget.

In sharp contrast, the minister of finance and economy is legally allowed to intervene in the foreign exchange market in Korea. As a result, the central bank cannot freely make a money-supply decision, the report says.

The bank contends that it has failed to win the trust of the people as an independent central bank whose main role is curbing inflation, because the government continues to make frequent public remarks on interest rate policies. It said that the central bank's efforts to stabilize financial markets through flexible money-supply and low-interest loans were overshadowed by the government-led restructuring and financial market stabilization schemes.

by Oh Jung-hee