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2016-07-15 16:19
By Kim Jae-won 

Bank of Korea (BOK) Governor Lee Ju-yeol is a man of confidence. He speaks openly on macroeconomic issues and is not afraid to challenge the government when he has different views on the economy and financial markets.

But on Thursday the chief central banker disappointed correspondents, including this reporter, when he blamed low oil prices for the bank not achieving its 2 percent inflation target for six straight months.

Lee said the BOK’s monetary easing policies were not a problem, and consumer prices will rise more sharply in the second quarter because international oil prices are expected to increase later this year.

In the first six months, consumer prices have gained only 0.9 percent from a year ago, falling far short of the target for 2016 to 2018.

The BOK chief defended himself and the bank over the extremely low rate by accusing oil prices. He explained that the core consumer price index, which excludes volatile food and oil prices, rose 1.7 percent from January to June.  

The BOK said the average price of Dubai crude, Korea's benchmark, was about 35 percent lower than the average from the first half of 2015, claiming the country’s consumer prices may have gained an additional 0.8 of a percentage point without such a reduction.

It was an easy excuse, but that was not what people wanted to hear. Market watchers were expecting more from the lifelong central banker, anticipating he would suggest effective measures to fight low inflation.

Yet, his key solution was to wait until oil prices rebound. What an easy job for a man who gets paid hundreds of millions of won a year, with exclusive rights to decide the benchmark interest rate and print banknotes with no limitation.

Lee offered no immediate remedies, insisting such steps were not necessary or desirable. He said there is little the central bank can do at the moment to boost inflation. Lee continued to argue that operating monetary policies solely to meet the inflation target could lead to negative effects, such as sudden changes in the economy.

OK, if it was his message to say that “there’s nothing we can do, so wait until oil prices rebound,” I wonder why he hosted the press conference, bringing scores of journalists from local and international media together.

If it was merely to keep his promise to explain to people through the press when the bank fails to meet the target by more than 0.5 of a percentage point for six straight months, that was needless, because he could just say “I’m sorry.”

I hope Lee regains his confidence as the nation’s top monetary policymaker rather than blame low oil prices, which are not guilty at all.

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