Top regulator cautious about shift in expansionary policy

SEOUL, July 20 (Yonhap) -- South Korea's top financial regulator said Monday the
government should maintain its expansionary policy stance as economic outlooks at
home and abroad remain uncertain.
The government and the central bank have been scrambling to boost the slumping
economy by unveiling large-scale fiscal spending plans and aggressively cutting
the key interest rate. But amid growing signs of economic recovery, the debate is
heating up over when the authorities should begin to tighten fiscal and monetary
policies.
"It would be undesirable for the country to change its current policy stance,
given the economic situation at home and abroad," Chin Dong-soo, chairman of the
Financial Services Commission (FSC), told reporters. "But there is the need to
fine-tune financial policies to enhance the effectiveness of broader
macroeconomic policies."
His remarks were echoed by the government and the Bank of Korea (BOK).
The finance ministry has said that it will stick to its "expansionary" economic
policy, as it is premature to say that the economy is making a full-blown
recovery. BOK Gov. Lee Seong-tae said the bank will maintain its accommodative
monetary policy for the time being because rising oil prices and economic slumps
in major advanced economies could serve as downside risks to growth.
Since the collapse of Lehman Brothers last September, the FSC has called on local
banks to expand lending to liquidity-squeezed smaller companies by providing
state credit guarantees. But as a severe credit crunch has eased, the watchdog
said it will focus on effectively distributing limited resources to sectors in
need by pushing for a swift corporate restructuring.
sooyeon@yna.co.kr
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