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BOK chief says inflation targeting a 'good' tool to 'shrug off' political pressure

Published: 19 Sep. 2025, 08:41 Updated: 19 Sep. 2025, 16:51

Bank of Korea Gov. Rhee Chang-yong holds a conversation with IMF Managing Director Kristalina Georgieva at the IMF headquarters in Washington on Sept. 18. [YONHAP]

Bank of Korea Gov. Rhee Chang-yong said Thursday that inflation targeting is a "good" tool to "shrug off" political pressure, as the U.S. Federal Reserve has been under pressure from U.S. President Donald Trump to lower the key lending rate to help boost the economy.

Rhee made the remarks during an open chat with Kristalina Georgieva, the managing director of the International Monetary Fund, in Washington, referring to a monetary policy strategy in which a central bank publicly sets a numerical target for the inflation rate and employs tools at its disposal to achieve it.

"I believe, in fact, inflation targeting is a good framework for many countries […] Inflation targeting is a good tool for me to shrug off many political pressures," he said.

"And then whenever there's a request for me to do something, I can always say this is not my mandate so the central bank can have a longer-term perspective. So in some sense, globally, I think inflation targeting is a good framework," he added.

His remarks came a day after the Fed lowered its key lending rate by a quarter percentage point — the first reduction this year and during the second Trump administration.

The cut came as Trump heaped pressure on Fed Chair Jerome Powell to bring the rate down, raising concerns about the central bank's independence.

Noting the Fed's effort to achieve inflation at a rate of 2 percent, Rhee said he is "very happy" that Korea's inflation is already there.

"So my mandate is okay," he said.

The governor also noted the Korean central bank's stance to maintain a "slightly higher" interest rate.

"My view is that, unlike large economies with a very resilient and strong financial sector, [for] countries like Korea, financial stability is a very essential issue," he said.

"When you consider the neutral rate of the interest rate, for example, I think I focus more on the neutral rate when we consider financial stability as a goal, too. So that is one reason why we want to maintain a slightly higher interest rate than others."

Yonhap