(3rd LD) Vice finance minister to attend BOK rate-setting meetings this year

(ATTN: ADDS responses from central bank in final 2 paras)
SEOUL, Jan. 7 (Yonhap) -- South Korea's vice finance minister will regularly
attend the rate-setting committee of the central bank starting this year in order
to voice the government's opinion on the overall monetary policy direction and
economic management, government officials said Thursday.

Vice Finance Minister Hur Kyung-wook will take part in the first such meeting of
the seven-member Monetary Policy Committee to be held by the Bank of Korea on
Friday, the Ministry of Strategy and Finance said in a statement.
Attendance at the monthly rate-setting meeting by finance ministry policymakers
is unusual as the government has sought to guarantee the independence of the
central bank in its monetary policy direction.
"We have attended the meeting in exceptional cases in order to respect the BOK's
independence but the economic crisis raised the importance of policy coordination
between the government and the central bank," the ministry said.
"From 2010, the government will attend the meeting regularly in a bid to
intensify policy coordination with the central bank and use the chance as a way
to exchange opinions among policymakers and share consensus on economic
conditions," it added.
Under existing laws governing the operation of the central bank, the vice finance
minister or vice chairman of the Financial Services Commission is allowed to
attend the meeting to relay the government's stance on specific policy issues.
But it has been rare for the government to take part in the meeting. Friday's
attendance by the vice finance minister marks just the fifth such, with the most
recent case prior to Friday having taken place in June 1999.
Analysts say that the move comes as the government and the central bank have been
at odds with each other over the direction of the nation's monetary policy in the
face of the worst global economic crisis in decades.
The government has pushed for an expansionary macroeconomic policy to prop up the
sluggish economy, and the BOK also joined the move by slashing key interest rates
to a record 2 percent and keeping it there for a 10th straight month.
With the economy showing signs of rebound, however, debate is growing over when
and how the nation should roll back such emergency measures taken to cushion the
shocks from the global economic turbulence.
The finance ministry has tended to focus more on bolstering the economy while the
central bank has made taming inflation its top priority.
Market watchers speculate that the BOK might raise the interest rate as it is
concerned about asset bubbles that might be caused by a delayed withdrawal of
stimulus measures. The government says that it is premature to roll back stimulus
measures until a sustained recovery is achieved.
"The government's attendance seems to be serving as a assuaging signal to market
participants that the BOK could not raise the rate for some time," said Jeon
Sung-woong, an analyst at Woori Futures Co.
Some observers note that the latest move by the finance ministry might inevitably
hurt the BOK's independence as committee members and the chief of the central
bank could be under pressure when making decisions that are not in line with the
government policy direction.
The BOK expressed concern that the government's move could dent the central
bank's independence.
"Under the law, the country's vice finance minister has the right to take part in
the meeting, but the bank is worried that the move to regularly attend it might
affect the rate-setting decision process by the BOK's policymakers," an official
at the BOK said, asking not to be named.
kokobj@yna.co.kr
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