Slowing domestic demand is increasing the need for pre-emptive responses, but household debt is at a level posing financial risks, board member Hwang said. — Reuters
SEOUL: A board member of South Korea’s central bank says economic growth and financial stability are key factors for the monetary policy board to consider as it determines the timing and pace of interest rate cuts.
“We should simultaneously consider the impact of interest rate cuts on growth and financial stability,” Hwang Kun-il, a member of the Bank of Korea’s (BoK) seven-seat policy board, was quoted as saying in a quarterly policy report released yesterday.
Slowing domestic demand is increasing the need for pre-emptive responses, but household debt is at a level posing financial risks, Hwang said.
Hwang added there was a need for an appropriate mix between fiscal policy and macro-prudential regulations to minimise trade-offs between the two policy objectives.
The BoK last month kept its policy interest rate at 3.50%, the highest since late 2008, but revived expectations for an imminent policy easing, which some analysts expect as early as its next meeting on Oct 11.
The central bank’s board members were cautious last month about lowering interest rates, as they were concerned about rising risks to financial stability despite slowing inflation, minutes from the policy meeting showed.
In the quarterly report, the central bank said there was high uncertainty over the outlook for the housing market and domestic demand was expected to improve gradually as higher corporate earnings and disinflation boosted consumers’ purchasing power. — Reuters
