Koh Seung-beom, BOK Monetary Policy Committee Member, "Interest Rate Hike Needed for Financial Stability"

Bank of Korea to Release Monetary Policy Meeting Minutes on July 15

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] At last month's Bank of Korea Monetary Policy Committee meeting, the base interest rate was kept unchanged, but Monetary Policy Committee member Ko Seung-beom was the only one to emphasize 'financial stability,' arguing that the base rate should be raised from 0.5% to 0.75%. Member Ko is a former official of the Financial Services Commission. While some other members agreed on the need to consider adjusting monetary policy, the prevailing opinion was to keep the rate steady for now and monitor the economic situation further.

According to the minutes of the Monetary Policy Committee meeting held on July 15, published on the Bank of Korea's website on the 3rd, Member Ko stated during the discussion on monetary policy direction, "Considering financial stability, it is time to adjust the degree of monetary policy easing." He added, "Despite recent government measures, the increase in household debt continues, and there is ongoing capital flow into asset markets such as real estate, which is concerning." He further said, "It is desirable to place greater weight on financial stability and raise the base interest rate from the current 0.50% to 0.75%."

The other members expressed cautious attitudes, citing economic uncertainty due to the resurgence of COVID-19 and the burden on vulnerable groups caused by interest rate hikes.

Member Han said, "The overall economic recovery trend is expected to continue, but it is necessary to observe a bit more the impact that the recent COVID-19 spread will have on the future growth path." He continued, "Since it has been just over a month since the Bank of Korea began communicating the possibility of adjusting the degree of monetary easing within this year, it is appropriate to keep the interest rate at the current level in this meeting to allow economic agents and financial market participants more time to share the monetary policy direction."

Another member noted, "While the underlying recovery trend of the domestic economy continues, the consumer price increase is likely to exceed the May forecast, and financial imbalance risks such as expanded private sector leverage (borrowed investment) and capital concentration in asset markets are gradually intensifying."

He argued, "Therefore, there is a need to adjust the degree of monetary easing, but due to the recent resurgence of infectious diseases, short-term economic activity may be constrained and uncertainty may increase. It is appropriate to keep the base interest rate unchanged and observe the development of the health crisis and domestic and external economic conditions further."

Another member who supported keeping the base rate unchanged emphasized, "Although the COVID-19 shock originated from a pandemic, the economic developments resemble a polarization shock. Since the negative impacts are concentrated on vulnerable industries, vulnerable groups, and vulnerable borrowers, it is necessary to closely monitor the income recovery trend and be cautious about adjusting the base interest rate. Discussions on raising the base rate can wait until after sufficient vaccination has been completed."

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