"The principle of an interest rate policy is an accommodative operation, but it does not necessarily mean a rate cut," he said, ruling out a "mechanical response" to a US move. "(We) will implement a monetary policy to meet the situation."

He stressed the need for fiscal maneuvers, saying South Korea has a "decent level" of state debt compared with many other countries.

"It is desirable to be active in budget spending to enhance productivity," Lee said during the plenary session of the National Assembly's strategy and finance committee.

He also dismissed worries that Asia's fourth-biggest economy may fall into the trap of stagflation.

"Chances of (stagflation) are very low," he said in response to rumors of a possible economic crisis in April.

The US is unlikely to designate South Korea as a currency manipulator, the BOK chief added.

"But we have a contingency plan and for now what's urgent is to prevent such a situation from occurring," he said. "We have conveyed our position (to the US) on a working level."

On the nation's economic growth forecast for this year, he said the BOK sticks to 2.5 percent. (Yonhap)