Bank of Korea Governor Lee Chang-yong: "Interest Rate Cuts Not Easy Within First Half of Year" (Comprehensive)

Inflation Rate Still High
One Member of the Financial Monetary Committee
Expresses "Need for Reduction Within 3 Months" Opinion

Bank of Korea Governor Lee Chang-yong is entering the Monetary Policy Committee meeting held at the Bank of Korea in Jung-gu, Seoul on the morning of the 22nd. Photo by Joint Press Corps

Lee Chang-yong, Governor of the Bank of Korea, reaffirmed his view that it will be difficult to lower the base interest rate within the first half of this year. It was revealed that one member of the Monetary Policy Committee suggested that a rate cut might be necessary within three months.

Governor Lee stated at a press conference held after the Monetary Policy Committee decided to keep the base rate unchanged on the morning of the 22nd that, based on his personal opinion, it is unlikely that the base interest rate will be lowered within the first half of this year.

When asked if there had been any change in his previous view that a rate cut might be difficult within six months, he explained that there was not much difference from before. He added, "We need to look at the data to see what will happen after the first half of this year," and said, "We will be able to make a judgment when we review the numbers during the economic outlook in May."

During the Monetary Policy Committee meeting that day, one member raised the possibility of lowering the base interest rate within three months. Governor Lee said, "Among the six committee members excluding myself, one suggested that the base rate could be lowered to below 3.5%." He added, "The other five members expressed the view that maintaining the rate at 3.5% even after three months would be appropriate."

He explained, "The five members pointed out that the inflation rate is still above 2%, and there is increased uncertainty about whether inflation will slow down as we expect, so there is no need to rush a rate cut yet."

He continued, "One member expressed the view that consumption is weaker than initially expected, inflationary pressure is expected to ease, and domestic demand is sluggish, so early rate cuts cannot be ruled out as a preemptive response."

Governor Lee judged that the domestic real estate project financing (PF) issue is at a manageable level. In response to a question about the April crisis theory that the construction industry would face mass bankruptcies after the general election, he said, "The idea that real estate PF will collapse after the general election is a big misunderstanding," adding, "Many real estate PFs are being resolved, and I want to question the basis for the claim that things will change significantly around the election."

He added, "Not all PFs can survive, but I think it is at a manageable level," and said, "We should promote financial stability through micro policies rather than solving this issue with interest rates."

He also stated that Korea's potential economic growth rate could rise through structural reforms. Governor Lee said, "We currently estimate Korea's potential growth rate at about 2%," and added, "We expect to announce a new figure at some point in the second half of the year."

He said, "If aging is handled poorly, there is a possibility that the potential growth rate could turn negative," and added, "It could change depending on what policies are implemented going forward." He continued, "We should not accept the idea that it will decline further from 2% due to aging," and explained, "I believe there is much room to raise it through effort."

Governor Lee added, "I hope a national consensus can be formed on how to raise the potential growth rate through structural efforts."

He also commented on overseas real estate investment, saying, "It is true that there is some exposure, but it is a very low proportion of total assets," and added, "I do not see it as a situation that would cause systemic risk."

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