2024-07-11 23:37:04
Base rate frozen for 1 year and a half… longest in history
The Bank of Korea has frozen its base interest rate for the twelfth time in a row. It has frozen interest rates for the longest period in history, continuing its tight monetary policy, as housing prices have been rising, especially in the metropolitan area, household debt has been rapidly increasing, and the exchange rate has remained high.
The Bank of Korea’s Monetary Policy Committee held a monetary policy direction meeting on the 11th and decided to maintain the base rate at 3.50% per annum. The base rate has not moved since January 13th of last year, 1 year, 5 months, and 28 days. This is the longest record, surpassing the previous longest freeze period of 1 year, 5 months, and 21 days (1.25% per annum, June 9, 2016 – November 30, 2017).
One of the factors that makes the Bank of Korea hesitate to make a “pivot” (change in monetary policy) is the recent surge in housing prices in the metropolitan area. At a press conference after the meeting, Bank of Korea Governor Lee Chang-yong said, “The rate at which real estate prices in the metropolitan area are rising is faster than expected,” and explained, “All members of the Monetary Policy Committee agree that the Bank of Korea should not make policy mistakes such as excessive liquidity injection or sending the wrong signal about the timing of interest rate cuts, which would trigger a rise in housing prices.”
The increase in household debt is also a concern. Governor Lee emphasized, “The current market expectations for a rate cut are somewhat excessive,” and “It is not desirable to reflect these expectations in advance and create expectations for rising real estate prices.” Although the pivot point is still uncertain, he hinted that he has turned on the “blinker” for a rate cut, saying, “The situation has been created to change lanes and change direction at the right time.” He said, “Excluding me, two out of the six (Monetary Policy Committee) members are of the opinion that we should keep the possibility of a rate cut open within the next three months.”
Reporter Jo Eung-hyung [email protected]
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2024-07-11 23:37:04