Reform ahead for South Korean central bank

Price stability is no longer a sufficient target for central bank policy, according to South Korean central bank governor Kim Choong-soo. “Perceptions as to the desirable role of the central bank are now shifting greatly,” he said at a speech commemorating the 60th anniversary of the bank.

Changes ahead for the Bank include expanding its remit to include financial stability; fostering closer ties with other central banks; and calling in consultants to help with the restructure. A key task was to work out how the goal of financial stability would fit with the “prime” goal of price stability.

In what seemed a message to other central bankers, the governor underlined the need for an international response to future crises. He spoke of the “drive for international policy co-operation” and international discussions on a “global financial safety net”. Even large foreign exchange reserves would not safeguard South Korea from international crises, he said. Expect a more outward-looking central bank in the months and years ahead.