Bank of Korea Governor Lee Ju-yeol speaks at a reporter conference on the afternoon of the 17th to check the operation status of the price stabilization goal at the Bank of Korea in Jung-gu, Seoul. News 1
The Bank of Korea decided to continue its easing monetary policy stance next year. It means that it will not raise the benchmark interest rate (0.50%), which has fallen to the lowest level ever, easily for the time being.
It also decided to support small and medium-sized businesses that suffered damage from Corona 19 through the efficient operation of the loan system. Although there are side effects such as a surge in asset value due to increased liquidity, it is not going to change the direction of this year’s monetary policy of ‘freeing money to save the economy’ by maintaining low interest rates and supporting loans.
The BOK announced on the 25th the ‘2021 Monetary Credit Policy Operation Direction’.
First of all, regarding the operation of the standard interest rate, the BOK said, “We will support the recovery of the growth trend and maintain an easing stance so that the inflation rate can stabilize at the target level (2%).” It suggested that.
However, regarding the possibility of adjusting the base rate, he said, “I will carefully judge the development of Corona 19 at home and abroad, the operation of monetary and fiscal policies of major countries, and changes in global trade conditions.”
It also revealed a plan to strengthen loan support for SMEs. First of all, in order to promote SME loans, it was decided to promote the efficiency of the’financial brokerage support loan system,’ which gives money to commercial banks at low interest rates. It also suggested the possibility of an extension in connection with the temporary expansion of the scope of’qualifying security securities’ provided by commercial banks when using BOK loans.
This is interpreted as the will of the BOK to release as much money as possible on the market through low interest rates and strengthened loan support. The BOK stated the reason for sticking to the easing monetary policy, saying, “It is expected that the domestic economy will recover gradually, but uncertainties are still high.”
The BOK expressed its intention to support economic recovery by supplying liquidity to the market, but on the other hand, there were concerns about its side effects. He warned that’drastic rise in asset prices’ and’increase in household debt’ due to liquidity increase could be a risk factor for the Korean economy in the future.
The BOK said, “We will reinforce efforts to mitigate the possibility of deepening financial imbalances, such as continuing the inflow of funds into the asset market and expanding the leverage of the private sector.” We will analyze the data so that the risks do not become present.”
Meanwhile, the BOK predicted that “the domestic economy will recover slowly and show a growth rate of 3%” regarding the economic situation next year. However, △ intensifying the spread of Corona 19 at home and abroad △ delayed semiconductor economic recovery △ intensifying conflict between the US and China as variables, he evaluated that “the uncertainty of the growth path is still high.”
Jeonghyun Kim reporter [email protected]
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