SEOUL, March 19 (Reuters) - A South Korean central bank board member said on Monday the government’s 4 trillion won ($3.8 billion) extra budget proposal to boost youth employment is unlikely to affect the pace of changes in monetary policy.
“Changing interest rates just on a few trillion won of increased fiscal expenditure would widen uncertainties related to macro-economic policies,” Lee Il-houng, one of seven board members at the Bank of Korea in a press conference, said at a press conference when asked if the increased government spending could delay the bank’s interest rate hikes.
Lee, known to have a hawkish policy bias, said the government’s expansionary fiscal policies should be understood as a medium-term stance, which wouldn’t have an immediate impact on the BOK’s tightening path.
South Korea said on Thursday it would propose a 4 trillion won supplementary budget and boost business subsidies to help cut the country’s high youth unemployment, which it sees reaching a dangerous level.
The BOK raised the base rate by 25 basis points in November, its first tightening in six years.
Lee added changes in U.S. policy rates would inevitably affect the South Korean economy “on various fronts,” without elaborating further.
The U.S. Federal Reserve is expected to deliver a hike in interest rate this week and discuss whether they would need to raise rates more aggressively in coming years.
Reporting by Cynthia Kim; Editing by Sam Holmes