Central bank to be more open on its decisions

In an effort to improve communication and transparency, the Bank of Korea plans to disclose the names and decisions of the members of the monetary policy committee on the same day as their monthly meeting.

Unless the decision on the key interest rate is unanimous, even if a single member on the committee disagrees, that person’s name and the decision he or she makes will be made public that afternoon.

The move comes as Bank of Korea Gov. Lee Ju-yeol addresses one of the biggest challenges facing the Korean central bank. Lee promised to improve communication when he took his current position two years ago.

Lee has decided to step up plans to provide more information sooner as the global and domestic financial market has become less predictable, especially since the beginning of this year, due to unexpected risks including the worsening tensions between the two Koreas, and the rapid decline of leading global economies including China and Japan.

Currently, the governor only announces whether the decision on the key interest rate was unanimous or not during a press conference held after the meeting is concluded. Details of the meetings are made public two weeks later, but names are scratched out, making it difficult to know which member made which comments.

The improved communication will be the biggest change since the monetary policy committee was assembled 18 years ago.

The Bank of Korea believes such action will help raise the accountability of the decisions that the members make while improving transparency.

The role of the committee members will also increase under the changes. They will now have more active roles in lectures and involvement in press briefings, mirroring board members of the U.S. Federal Reserve who express their own opinions more freely.

Until now, members on the monetary policy committee had few public lectures and participated in a press briefing about once every quarter.

The lectures at major universities are expected to start in March.

The changes are part of the reform that Lee has been pushing strongly since late last year.

The Bank of Korea has also decided to reduce the number of meetings that the monetary policy committee has been holding from 12 a year to eight starting in 2017.

The burden of the changes is expected to be heavier on new members of the committee as four of the seven are to leave this April. Other than the governor and senior deputy governor of the central bank, the remaining five members have a four-year tenure. Only one out of the five terms expire in May 2018.

Meanwhile, the market is closely monitoring today’s monetary policy committee meeting. Many are expecting the central bank to keep the interest rate at the current level.

“One of the things we have to notice is that there are developments that aren’t familiar,” said So Jae-yong, an analyst at Hana Financial Investment, citing the Japanese market plunge last week despite the yen value depreciating sharply against the greenback.

“Although there are important economic announcements, including the U.S. inflation and exports in Japan and China, the biggest interest will be concentrated on the central bank’s meeting at the European Central Bank and Bank of Korea.”

Nomura Securities analyst Kwon Young-sun, however, said they wouldn’t be surprised if one or two members on the monetary policy committee support a 0.25 percentage point cut on the key interest rate.

“There is a 40 percent chance of an interest cut, considering the worsening macroeconomic data,” Kwon said in a report released on Monday. “We estimate a 60 percent possibility of a rate cut in the future.”

Nomura Securities, however, projected the Bank of Korea would freeze the key interest rate, saying the Korean central bank will likely push back its decision until markets stabilize.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]