Decision-making Process of Monetary Policy

The monetary policy decisions are made by the Monetary Policy Board, the top decision-making body of the Bank of Korea. The actual operation of monetary policy shown in the process of deciding on the Base Rate, its most representative decision, is as follows:

The Base Rate, the BOK's policy rate, is set during the 'main meeting' of the Monetary Policy Board eight times per year. The dates of the Monetary Policy Board meetings for monetary policy decision-making (i.e. regarding the Base Rate) for the next year are set and released near the end of the current year. However, if a policy response is needed due to rapid changes in economic conditions, the Board will hold extraordinary meetings.

Various unofficial meetings of working-level staff of the major BOK departments concerned are held during the week before the main meeting, and a ‘trends briefing meeting’ is held the day before it. At this particular meeting, the major departments provide overall briefings on domestic and overseas financial and economic conditions to the Monetary Policy Board members, after which discussion among the members takes place. The main meeting usually starts at 9 a.m. the next day, and the Base Rate is decided and the statement on the ’Monetary Policy Decision’ is written during it.

Meanwhile, the Monetary Policy Board applies a look-at-everything approach, taking into overall account domestic price movements, the economy, financial and foreign exchange market conditions, changes in the trend of the world economy, etc. Immediately after the main meeting, the Governor of the Bank of Korea holds a press conference to explain the detailed background to the board's Base Rate decision.

The minutes, recording the details of the discussions during the main meeting, are released two weeks after the meeting. The release of the minutes of the Monetary Policy Board meeting, together with the announcement of the monetary policy decision and the governor's press conference, are parts of the Bank of Korea's efforts to help the public better understand the policy decision details and to enhance the transparency of monetary policy.