How credible is Korea's inflation targeting?

Regional head of research & senior economist, Treasury and Capital Markets, with Standard Chartered Bank in Hong Kong, Chi Lo questions the credibility of Bank of Korea''s inflation policies.

The Bank of Korea BoK announced recently that monetary policy would target price stability, and set an inflation target range of 1.5-3.1% yoy for this year and an average target of 2.1% yoy for 2001.
It also said it would adopt pre-emptive stance on interest rates to rein in inflationary pressures.

If all this means explicit inflation targeting, the pledge will eliminate the price signal extraction problem that inflation brings, which distorts decision-making that drives economic growth. So it should be good news for the Korean markets. But how credible is the BoK's pledge

No track record

There is no history of inflation targeting by the BoK, and its...


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