The Bank of Korea Holds Base Interest Rate Again... Maintains Current 0.50% (Update)

Concerns Over Liquidity Concentration in Asset Markets Like Real Estate and Stocks
Experts Say "A Situation Where Interest Rates Can Neither Be Raised Nor Lowered"

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] The Bank of Korea decided to keep the base interest rate steady at 0.50% per annum. It is interpreted that lowering the rate further was difficult as liquidity was rapidly flowing into asset markets such as real estate and stocks.

The Monetary Policy Board of the Bank of Korea held a meeting on the 14th, chaired by Governor Lee Ju-yeol, and decided to maintain the base interest rate at 0.50%. After lowering the base rate to 0.50% in May, the Bank of Korea kept the rate unchanged in two consecutive meetings in July and August.

Considering that the current rate is close to the effective lower bound, there seems to be limited room for further cuts. Governor Lee previously expressed a cautious stance on additional rate cuts at a press conference following the Monetary Policy Board meeting in August, stating, "Whether to lower the rate further requires careful consideration of both expected benefits and side effects."

Experts diagnose that in the phase of the resurgence of the novel coronavirus infection (COVID-19), raising rates is not possible, and lowering rates is also difficult due to concerns over liquidity concentration in the stock market and real estate.

Professor Andonghyun of Seoul National University’s Department of Economics emphasized, "There is no reason to raise rates unless COVID-19 ends," adding, "Considering the real estate concentration phenomenon and the rapidly increasing household debt, lowering rates is also not easy."

Research Fellow Jo Young-moo of LG Economic Research Institute said, "The economic trend has not turned to an upturn and the situation could worsen," and added, "If rates cannot be lowered any further, other monetary easing policy measures should be considered."

There are also forecasts that the Bank of Korea’s stance on keeping rates steady will continue long-term, possibly until next year. Research Fellow Jo stated, "The COVID-19 crisis is not over yet," and "I expect the rate to remain unchanged until the economy can withstand the shock of a rate hike." Raising rates in a situation where the real economy is sluggish is considered inappropriate.

Meanwhile, there is one remaining Monetary Policy Board meeting this year to decide the base interest rate, scheduled for November 26.

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