South Korea’s new central bank chief has signaled a cautious approach to monetary policy as rising geopolitical risks cloud the economic outlook. In his inauguration speech on Tuesday, Bank of Korea Governor Shin Hyun-song said policymakers must remain “cautious and flexible” as the conflict in the Middle East generates a supply shock that complicates both the inflation and growth outlooks.
He warned that higher oil prices associated with the war involving Iran are simultaneously driving inflation up while dampening economic activity, a combination that heightens risks to financial stability and fuels market volatility. Shin stressed the importance of striking a balance between maintaining price stability and safeguarding the financial system amid these uncertainties.
Shin began his four-year term on Tuesday and will preside over his first policy meeting on May 28. Markets are expected to closely scrutinize that meeting for clues on how the central bank intends to steer policy through an increasingly challenging environment.
