At the National Fiscal Strategy Meeting on the 27th of last month, President Moon Jae-in said, "It is necessary to maintain an expanded fiscal stance for a sure rebound of the economy and bridging the corona gap until at least next year.
It seems that Han Eun is preparing to 'tighten the money line'. In the meantime, the prospect of raising interest rates within the year is strong as the liquidity that the government has released in the market to respond to COVID-19 acts as an inflationary pressure.
The government seems to want to revive the economy with the money released by maintaining the expansionary budget, and the BOK seems to want to stabilize inflation by raising interest rates. Fiscal and monetary policies are at odds. Since there is a lot of money released during that time, side effects start to appear, so it will not be possible to just solve it. Even if it is loose like the dollar, it is not in a situation where inflation can be exported as a key currency, so it cannot imitate the dollar.
3363 trillion of money released on the market is also the largest ever 51 trillion in one month↑
If fiscal policy and monetary policy go in one direction, synergies will emerge, but it is unlikely that they will go in the same direction because of the different perspectives at present. It may be a lame duck, or the issue of independence of the BOK may be raised. The interest rate is the sole authority and duty of the BOK.
The government may be in a situation where the government can release money by borrowing and at the same time the BOK raises interest rates and pecks at the money line.
If the won is the key currency, it would be good to save money without raising interest rates. Korea is also a net creditor country, and I think the won should soon become a safe asset. I hope that the CBDC won will play a pivotal role, even a little.
