Bank of Korea's Rhee nonplussed by Powell's hawkishness

Bank of Korea Gov. Rhee Chang-yong arrives at the Incheon International Airport on Aug. 29 after attending the Jackson Hole meeting in Wyoming, United States. [NEWS1]

Bank of Korea Gov. Rhee Chang-yong said the central bank's monetary policy direction remains unchanged following hawkish remarks from the U.S. Fed chief in Jackson Hole last week.

Rhee said that the message delivered by Fed Chairman Jerome Powell "at the Jackson Hole meeting was that the Fed will continue raising rates in big steps of between 50 and 75 basis points and that it will maintain the direction to raise the rate until inflation stabilizes to the target level."

"That is not much different from the Bank of Korea's expectations when it decided on the interest rate in August, so its future monetary policy direction has not changed."

The Bank of Korea raised the rate by another quarter percentage point on Aug. 25, saying inflation is still high. It was the fourth consecutive rate increase by the Bank of Korea. Rhee signaled further rate increases, saying inflation is still ongoing.

The Bank of Korea forecasts Korea's annual inflation to hit 5.2 percent this year.

Rhee made the Tuesday statement after he told Reuters in an interview that Bank of Korea is "not independent from the Fed."

The Federal Reserve will "use our tools forcefully" to control inflation, Powell said at the Jackson Hole Economic Symposium on Friday. He said pain to households and businesses caused by the rate increases are "the unfortunate costs of reducing inflation."

"Bank of Korea will continuously and thoroughly monitor the Fed's decisions on policy rates and their impacts inside and outside of the country" since the Fed's rate decision could "expand volatility" as the finance and foreign currency exchange markets process the change, Rhee added.

After renewing a 13-year-plus low on Monday, the won recovered to 1,346.70 to the dollar.

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