South Korea picks IMF official as new central bank chief

Nominee is widely expected to continue country’s efforts to curb inflation with aggressive interest rate hikes.

Changyong Rhee,
Rhee Chang-yong, director of Asia Pacific at the IMF, has been nominated to be the next head of South Korea's central bank [File: SeongJoon Cho/Bloomberg]

South Korea nominated on Wednesday veteran International Monetary Fund official Rhee Chang-yong as its new central bank chief, a pick widely expected to continue the bank’s efforts to curb inflation with aggressive interest rate hikes.

Rhee, currently the director of the Asia and Pacific Department at the IMF, will join the Bank of Korea as Asia’s fourth-largest economy battles surging prices, driven by supply chain snags and the Ukraine war.

He succeeds Governor Lee Ju-yeol, whose term ends March 31 after eight years helming the bank.

Economists say while Rhee is likely to be less hawkish than Lee, affecting the makeup of the bank’s seven-member board, he is not expected to significantly alter the BOK’s current policy posture.

“Looking at his past comments and reports, he is more of a dove, although he won’t reveal such a stance given current economic climate,” said Kyobo Securities economist Paik Yoon-min. “But I do think that the BOK’s board might end up with more dovish colour.”

The BOK next reviews its policy rate on April 14 and analysts expect the board to take the base rate to 1.75 percent by end-2022 from 1.25 percent currently.

Kong Dong-rak at Daishin Securities also said Rhee would be less of a hawk than Governor Lee, although “he won’t blatantly make that clear until after a few hikes”.

The BOK has raised interest rates three times since August to hose down inflationary pressures and a build-up of financial imbalances, making it one of the world’s more hawkish central banks.

The bank now says even more aggressive rate hikes may be needed amid rising import costs and ongoing supply chain hiccups.

Political transition

The change in bank governor comes amid a wider political transition in the country with conservative President-elect Yoon Suk-yeol set to take office in May, replacing outgoing leader Moon Jae-in.

Moon’s office said on Monday the president had discussed the nomination with Yoon, although Yoon’s transition committee released a separate statement saying the nomination had not been addressed in conversations.

Before commencing his four-year term, Rhee will be subject to questions from lawmakers about his economic expertise and ethical standards.

Members of the National Assembly often grill those tapped as top officials in parliamentary hearings, although Rhee’s nomination does not formally require legislative approval.

Such hearings in the past have focused on a wide range of personal matters, including nominees’ property transactions, tax histories and even the military service of relatives.

As a director at the IMF, Rhee currently oversees its lending operations and surveillance work across Asia-Pacific.

Before joining the IMF in 2014, Rhee served as chief economist at the Asian Development Bank and a Sherpa for the country’s G-20 Presidential Committee when South Korea hosted the group’s summit in 2010.

He has worked closely with finance ministry officials, including former vice finance minister Choi Sang-mok who is now a part of President-elect Yoon’s transition committee.

Source: Reuters