But household debt remains a concern, said the BOK chief.“Household debt contracted in September but it is still early to confirm financial stability,” said Rhee.“The bank will keep an eye on how the rate cut would affect housing transactions and the rising pace of housing prices.”Rhee said Korea is not in the same position as the US, which can make a big cut of half a percentage point.“The US hiked the base rate by over 5 percentage points to tame the country’s high inflation of a more than 10% jump, which justifies the Fed’s fast-paced cutting,” said Rhee.“But we raised our rate by 3%, meaning it is wrong to expect a 0.5 percentage point cut like the US and think to borrow money too easily.”After the rate cut, the Bank of Korea hinted at a slow easing cycle, citing lingering economic uncertainties.“The moderate growth trend will continue, but uncertainties regarding the future path of output growth have heightened,” said the bank.
South Korea’s central bank is open to more cuts in interest rates after its first rate reduction in more than four years on Friday but only in a slow and small step largely due to the country’s still high household debt.“From where we stand now, (the policy interest rate) sits above our neutral interest level by any model, so there is room for additional reductions,” Bank of Korea (BOK) Governor Rhee Chang-yong said after the central bank’s rate decision meeting on Friday.
STILL CAUTIOUS ABOUT HOUSEHOLD DEBT The BOK kept the benchmark interest rate at a 15-year high of 3.50% for a 13th consecutive time until August – the longest such run in the country – as the country’s mounting household debt had made the bank hesitant to pivot in its monetary policy in the past months.
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