Choo and Rhee in agreement about inflation and vow action

Finance Minister Choo Kyung-ho, center, and Bank of Korea Gov. Rhee Chang-yong, second from right, at a meeting held in central Seoul on Thursday. [NEWS1]

The Bank of Korea and the Finance Ministry agree that inflation is the top priority.

Gov. Rhee Chang-yong and Finance Minister Choo Kyung-ho spoke Thursday at a meeting held at the Korea Federation of Banks in central Seoul to discuss macroeconomic policy.

The two have been meeting regularly in recent weeks as the economy faces a wide range of risks and as the government and the central bank struggle to contain consumer prices without slowing growth.

"We are in agreement that inflation is of utmost importance," Choo said. Rhee said that he agreed with that sentiment.

Financial Supervisory Service Chairman Lee Bok-hyun also attended the meeting.

"Taking a 'big step' is a matter that should be decided following the market response until the next monetary policy board meeting," Rhee said. "There's three to four weeks until the next meeting, during which a lot of changes can happen."

The next board meeting takes place on July 13.

Rhee added that holding an emergency board meeting before the next meeting "has not yet been considered."

The meeting Thursday followed a 75-basis point increase in rates in the United States Wednesday. Federal Reserve Chairman Jerome Powell said a 50 or 75 basis points rate hike will be most likely at the policy meeting scheduled next month.

The U.S. benchmark funds rate is now in the 1.5-percent-to-1.75 percent, compared to Korea's 1.75 percent base interest rate.

Choo reiterated that the economy faces "multiple crises" and that "the difficulties will continue for a considerable time." He cited the Fed's rapid rate increases, the Russia-Ukraine war and supply chain disruptions.

The financial authorities and the bank will also aim to ease market volatility and manage financial risks, including bonds and currency markets.

The government will operate bond buyback programs and the central bank will purchase government bonds if the bond market "reacts too excessively," Choo said.

Korea's 10-year government bond on Wednesday traded 3.795 percent, up 1.724 percentage point on year. The yield on the 3-year government bond on Wednesday was 3.666 percent, up 2.359 percentage points in the same period.

Yang Ji-sung, an economist at Samsung Securities, projected the U.S. rate to reach 3.5 percent by the year end in a report released on Thursday.

The Kospi inched up 0.16 percent and the Kosdaq 0.34 percent on Thursday.

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