SEOUL, May 16 (Yonhap) -- South Korea's finance minister and the central bank chief on Monday stressed the need for close policy coordination as the country's economy faces heightened uncertainty amid high inflation.
Finance Minister Choo Kyung-ho and Bank of Korea (BOK) Gov. Rhee Chang-yong held a meeting to discuss ways to stabilize inflation, financial market volatility and policy coordination.
"The South Korean economy is in a grave situation. As policy tools are quite limited, I think the government and the central bank need to communicate to make a good policy mix," Choo said at the start of the meeting.
Rhee made a similar remark, saying the need to harmonize the fiscal and monetary policies has increased more than ever.
Last week, the finance ministry proposed a record extra budget of 59.4 trillion won (US$46.3 billion) in the latest move to compensate pandemic-hit merchants for their losses caused by stricter virus curbs.
Critics said the extra budget is not in sync with the central bank's monetary tightening drive as the move could stoke inflation.
In April, the BOK raised the policy rate by a quarter percentage point to 1.5 percent, the fourth rate hike since August last year, in a bid to tame inflation and curb household debt. Market players forecast the central bank to further hike the borrowing costs at the May 26 policy meeting.
South Korea's consumer prices grew at the fastest pace in more than 13 years in April amid soaring fuel prices and the economic recovery. Consumer prices spiked 4.8 percent on-year in April, a pickup from a 4.1 percent gain in March.