"Many Issues to Discuss"... Lee Chang-yong, Governor, Reveals Complex Thoughts Just Before the Monetary Policy Committee Meeting

On the 19th, Lee Chang-yong, Governor of the Bank of Korea, said before the base interest rate decision at the Monetary Policy Committee meeting on the 16th floor of the Bank of Korea in Jung-gu, Seoul, "There seems to be a lot to discuss today (with the MPC members)."

Lee Chang-yong, Governor of the Bank of Korea, is presiding over the Monetary Policy Committee plenary meeting held on the 19th at the Bank of Korea in Jung-gu, Seoul. Photo by Joint Press Corps

On that day, just before the meeting started at 8:59 a.m., Governor Lee entered the MPC meeting room and opened with, "It's raining heavily," then struck the gavel and told reporters, "Let's meet downstairs at the press briefing room."

Governor Lee’s remarks appear to reveal the complicated calculations amid expanding market volatility, such as the sharp rise in U.S. Treasury yields and the escalating war situation between Israel and the Palestinian militant group Hamas.

Recently, the 10-year U.S. Treasury yield surpassed 4.9% on the 18th (local time), approaching the 5% level for the first time in 16 years. This is a result of confirmed strong consumer spending despite expectations of prolonged high interest rates. The rise in U.S. Treasury yields leads to an increase in domestic long-term government bond yields and market interest rates, which in turn pushes up loan interest rates. Additionally, on the same day, Israeli media reported that the Israeli government and military leadership mentioned the possibility of a prolonged war, further intensifying uncertainty over international oil prices and fueling inflation concerns.

Domestically, the accumulating household debt and the persistently high exchange rate are factors increasing the Bank of Korea’s concerns. As of the end of the second quarter, Korea’s household debt to GDP ratio stood at 101.7%, ranking fourth highest in the world after Switzerland, Australia, and Canada. Raising the base interest rate to curb debt growth could increase concerns over debt defaults, potentially triggering financial market instability.

Meanwhile, the new base interest rate is expected to be announced around 10 a.m. today. The market anticipates that the Bank of Korea will maintain its hawkish stance while keeping the base rate unchanged for the sixth consecutive time. With central banks worldwide signaling prolonged high interest rates and domestic and external uncertainties, attention is focused on the message the Bank of Korea will deliver.

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