Bank of Korea Maintains Base Interest Rate at 2.50% per Annum

Korea Economic Daily

Summary

The Bank of Korea announced its decision to freeze the base interest rate at 2.50% per annum.
It explained that the recent rise in household debt and real estate prices are the main factors behind the rate freeze.
The need for a further rate cut is not considered significant, as the economic recovery has eased concerns over low growth.

*Lee Chang-yong, Governor of the Bank of Korea, strikes the gavel during the Monetary Policy Committee meeting held at the Bank of Korea in Jung-gu, Seoul, on the morning of the 10th.*

On the 10th, the Bank of Korea held a Monetary Policy Direction meeting of the Monetary Policy Committee at its main building on Namdaemun-ro, Seoul, and decided to maintain the base interest rate at an annual 2.50%. After lowering the rate from 2.75% to 2.50% per annum in May, they opted for a freeze this time.

The decision to freeze the rate is closely linked to a recent surge in household debt, according to some analyses. The Bank of Korea and financial authorities reported that household loans increased by KRW 6.5 trillion last month. The sharp rise in real estate prices contributed to the increase in lending.

Another factor for not rushing a rate cut was the somewhat eased concerns over low growth, as some institutions have recently raised Korea’s economic growth forecast to the 1% range since last month.

This decision was in line with the survey results of the Hankyung Economist Club, where 95% of respondents expected a rate freeze.

Reporter Kang Jin-gyu josep@hankyung.com