The Bank of Korea froze the standard rate of 0.5% per year at the Financial Monetary Commission held on the 15th. As it should support the real economy contracted by Corona 19, the benchmark interest rate was maintained, the lowest ever.
Some argue that the monetary policy stance should be changed as the asset market such as real estate is overheating. However, it is an analysis that the benchmark interest rate, which is the lowest ever, will be maintained throughout the year, considering the growing difficulties of the vulnerable, such as small self-employed and marginalized companies due to Corona 19.
In response to the Corona 19 incident, the BOK previously held an interim bankruptcy committee in March last year and lowered the standard interest rate by 0.5 percentage points from 1.25% per year to 0.75% per year. In May of last year, it further cut to an annual low of 0.5%. After that, at each of the four meetings held, the 7 members unanimously decided to freeze the standard interest rate. As the real economy contracted due to Corona 19, it is analyzed that measures based on the judgment that a easing monetary policy should be maintained.
Market interest is focused on the extent to which the BOK is wary of the asset market. Recently, as individual investors flocked to the stock market, the KOSPI index exceeded the 3100 line after the 3000 line. There is an analysis that household debt is increasing at an all-time low interest rate, and this money is directed to the stock market and the real estate market.
Bank household loans were 98.8 trillion won at the end of last year, an increase of 10 trillion won (11.3%) from the end of 2019. Mortgage loans, which account for the majority of household loans, increased by 68.3 trillion won to 71.9 trillion won. The yearly increase was the largest in five years after regulations such as LTV were eased in 2015 (70 trillion KRW). Credit loans increased by 32.4 trillion won to 266 trillion won, the largest increase in history. It is interpreted as the result of households’ debt investments (investment from debts) and ‘spirituals (attracting the soul)’ to buy stocks and real estate At a press conference right after the FSC, interest is focused on what message BOK governor Lee Ju-yeol will bring to the overheated stock market and real estate market.
However, there is a prospect that the BOK will raise the benchmark interest rate only in 2022. Lee Mi-sun, a researcher at Hana Financial Investment, said, “The Korean economy will recover to pre-Corona 19 in the third quarter of this year.”
Reporter Kim Ik-hwan [email protected]
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