"Rapid Rate Cuts Could Lead to Housing and Stock Market Surges... We Must Avoid Past Mistakes"

Korea Economic Daily

Summary

Changyong Lee, Governor of the Bank of Korea, emphasized cooperation with the government regarding the impact of interest rate policies on real estate prices.
Governor Lee stated that they will not rapidly cut rates to avoid repeating past mistakes during COVID-19.
The Bank of Korea's Monetary Policy Committee decided to lower the base rate from the previous 2.75% to 2.5%.

Changyong Lee, Governor of the Bank of Korea, stated, "I hope to share mutual understanding with the incoming government regarding concerns that interest rate policies may stimulate real estate prices in specific regions."

Governor Lee held a monetary policy direction meeting at the Bank of Korea in Jung-gu, Seoul, on the 29th, and said, "There is a high possibility that liquidity supply will lead to asset price increases rather than corporate investment or real economic recovery."

Governor Lee explained, "All Monetary Policy Committee members agree that the base rate should be decided while observing the impact on Seoul real estate prices and household debt."

Regarding the reason why the Bank of Korea did not implement a 'big cut' (a 0.5 percentage point rate cut at once), he said, "If we quickly lower rates and supply liquidity, it will flow into asset markets such as real estate or stocks, pushing up prices rather than stimulating the economy," adding, "There is a high possibility of repeating the mistakes made during COVID-19."

He also added, "The new government's task is to decide where to stimulate the economy without repeating past mistakes."

Meanwhile, the Bank of Korea's Monetary Policy Committee decided to lower the base rate from the previous 2.75% to 2.5% at the monetary policy direction decision meeting held this morning.

Songryeol Lee, Hankyung.com reporter yisr0203@hankyung.com