Lee Ju-yeol "Real Estate Market Overheating Influenced by Factors Other Than Interest Rates"

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] Lee Ju-yeol, Governor of the Bank of Korea, stated on the 17th, "The current monetary policy of the Bank of Korea is accommodative in tone and I do not think it conflicts with the government's real estate policy." He explained that the overheating of the real estate market was due to a combination of various factors.

Governor Lee made these remarks during a press conference after the Monetary Policy Committee decided to keep the base interest rate at 1.25% per annum, in response to a question about whether the base rate decision could be considered as part of policy coordination with the government to stabilize real estate prices.

He said, "The Bank of Korea's goal is to comprehensively consider the macroeconomic trends and financial stability situation in future monetary policy," adding, "It is necessary to also consider financial stability when deciding how long to maintain the accommodative stance."

Regarding the claim that the low base interest rate overheated the real estate market, he assessed that factors other than interest rates also had an impact. He said, "It is true that accommodative financial conditions such as low interest rates have influenced housing prices to some extent, which is a phenomenon seen worldwide," and added, "However, I believe that factors other than interest rates, such as supply and demand, market participants' future price expectations and hopes, and government policies, also influenced housing prices."

When asked whether real estate regulations might burden the economy by shrinking the construction market, he said, "I understand that the government made the decision prioritizing the importance of stabilizing housing prices," and added, "The construction market is undergoing an adjustment as a reaction to several years of boom, while the government is making significant efforts to expand social overhead capital (SOC) budgets, including national balanced projects and increased housing supply in the metropolitan area."

Regarding whether the Bank of Korea might tighten monetary policy by the end of this year amid increasing positive indicators, he replied, "Considering various current conditions, I respond that the accommodative stance will be maintained."

On the role the Bank of Korea can play in relation to the government's expansive fiscal policy to solve structural problems this year, he explained, "The role of the central bank is to accurately diagnose problems and provide policy recommendations to the government," adding, "Structural problems are much more effectively addressed by micro-level fiscal policies."

Meanwhile, Governor Lee revealed that during the Monetary Policy Committee's interest rate decision process, members Jo Dong-cheol and Shin In-seok submitted minority opinions advocating a 0.25 percentage point cut in the interest rate.

This content was produced with the assistance of AI translation services.