South Korea’s central bank, the bank of Korea (BoK), was established in 1950 under the Bank of Korea Act. In 1998, the BoK introduced an inflation target regime and switched its framework from monetary aggregate-oriented operations to an interest rate-oriented. The bank normally sets an inflation target in consultation with the government and uses the consumer price index (CPI) as the target indicator. For 2010-2012, the central bank’s inflation target is 2.0% to 4.0%. In 2008, the central bank announced its new monetary policy framework and changed the policy rate from the call rate to the Bank of Korea Base Rate. In order to achieve price stability, the Monetary Policy Committee, which is composed of seven members, including the central bank governor, the senior deputy governor and other five members recommended by the ministry and the BoK, presents the Base Rate every month after considering overall economic performance, the financial market and price level.
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