The Bank of Korea announced that it will maintain its monetary policy easing trend next year. However, he expressed a cautious stance on further lowering the base rate, saying that he would put more weight on financial stability.
The Bank of Korea announced that it will pay more attention to financial stability in the operation of monetary policy next year. News 1
On the 25th, the Bank of Korea in the ‘2021 Direction of Monetary Credit Policy Operation’, “Supporting the recovery of growth and stabilizing the inflation rate at the target level, while maintaining the easing of monetary policy. “We will pay more attention to the risk of financial imbalances such as the inflow of funds and the increase in private credit.” As the ultra-low interest rate prolongs, money flocks to the real estate and stock markets through so-called’spirituality’ and’debt investments’, and as a result, household debt expands to a point that exceeds the gross domestic product (GDP). This is because risk factors are increasing.
The flow of funds to the asset market centered on the housing market is a concern for the Bank of Korea. Shutterstock
The degree to which the standard interest rate is to be managed at a moderate level, “I will carefully judge the impact of the development of Corona 19 at home and abroad, the monetary and fiscal policies of major countries, and the impact of changes in global trade conditions on the domestic macroeconomic flow and financial stability.” He explained. In addition, the BOK added, “We will review effective use of policy measures other than interest rates in preparation for the intensifying economic slowdown.” As the benchmark interest rate has already fallen to a record low of 0.5%, it is an explanation that focuses on other policy measures such as simple purchase of KTBs rather than additional base rate cuts.
Regarding the request to add’employment stability’ to the purpose of the BOK’s establishment, he said, “We will come up with a plan suitable for our situation by referring to cases of central banks in major countries and experts’ opinions.” Currently, an amendment bill is proposed in the National Assembly to put employment targets into the BOK.
Reporter Han Ae-ran [email protected]