Half-point rate increase not out of the question

Finance Minister Choo Kyung-ho, left, and Bank of Korea Governor Rhee Chang-yong before the meeting in central Seoul on Monday. [BANK OF KOREA]

Bank of Korea Gov. Rhee Chang-yong said a half-point rate increase is not out of the question.

The bank was not necessarily considering that much of an increase through April, "but a judgment will have to be made based on comprehensive data, like how high inflation will rise," Rhee said following his first meeting with Finance Minister Choo Kyung-ho on Monday.

Rhee reiterated that the monetary policy board will not just take into consideration the rate gap between Korea and the United States. He said the board will also take overall growth and inflation into account.

"Our situation is very different from that of the United States," said Rhee. "Even though inflation is high, the level isn't as high as in the United States."

He added that two more half-point increases by the U.S. Federal Reserve have already been factored in by the market and are almost certainties.

The monetary policy board "will be able to evaluate the changes in the growth rate and inflation in Korea" before it changes the rate.

The next monetary policy board meeting is scheduled to take place on May 26. It will be Rhee's first meeting since he was inaugurated in April.

Also on Monday, Choo highlighted the need for cooperation between the government and the central bank.

Setting "economic policy isn't something the central bank or a government department can do alone," Choo said.

They discussed the overall economic situation and exchange rates during a private breakfast meeting, according to Choo.

Choo and Rhee both agreed on the need to improve the economy, strengthen the social safety net and enhance the fiscal soundness, the Bank of Korea said.

BY JIN MIN-JI [jin.minji@joongang.co.kr]