Bank of Korea (BOK) Gov. Rhee Chang-yong attends a press conference at the central bank's headquarters in Seoul in this Dec. 20, 2022 file photo. Yonhap

The Bank of Korea (BOK) will closely cooperate with the government to engineer a "soft landing" of the country's economy confronting high uncertainty at home and abroad, the head of the central bank said Tuesday.

BOK Gov. Rhee Chang-yong also said that the central bank will continue to place a top priority on fighting inflation this year but also take note of developments in the broader economy and financial markets and remain vigilant against excessive volatility.

"The BOK, along with the government, will do its utmost in drawing up precise measures in a way that they will contribute to engineering a soft landing of the Korean economy at a time when uncertainty is so high that visibility is cloudy," Rhee told a meeting with financial leaders in Seoul.

"We will maintain monetary policy with a focus on price stability but at the same time take note of changes in conditions in the economy, financial and foreign exchange markets as well," he added. "If necessary, we will actively take market stabilization measures and closely communicate and cooperate with relative authorities."

Concerns are growing for an economic hard landing due to the BOK's aggressive rate increases to bring inflation down. The BOK has hiked the benchmark interest rate by a combined 2.75 percentage points since August 2021.

Fast-rising borrowing costs have increased debt burden on households and businesses alike, raising speculation that the local economy could fast cool down amid mounting global recession woes.

Looking back at last year, Rhee said Korea's economy suffered "not a little" challenge stemming from soaring inflation and instability in the financial and forex markets, worrying that such uncertainty will stay high this year as well.

He, however, cautioned against too much pessimism, saying that excessive concerns could unnecessarily cool the economy.

Touching on the country's widening trade deficit, the top central banker said that it could rise further "for the time being" this year but things could bounce back at a fast pace when external market conditions recovers from such developments as China's reopening. (Yonhap)