People Power Party Pressures for Interest Rate Cut... Bank of Korea Advocates Caution

Discussion on Interest Rate Cuts at the People Power Party's Livelihood and Economic Stability Committee
Kim Sang-hoon "Consumer Sentiment Has Recovered but Limits Remain in Overcoming Long-Term Domestic Demand Slump"
Bank of Korea "Must Consider Variables Such as Foreign Exchange Market, Housing Prices, and Household Debt"

The People Power Party's Special Committee on Livelihood and Economic Stability met with financial authorities on the 15th to exchange views on issues including the base interest rate. Kim Sang-hoon, chairman of the People Power Party's Special Committee on Livelihood and Economic Stability, conveyed that the Bank of Korea stated it would "consider whether to lower the interest rate by taking into account variables such as the foreign exchange market, housing prices, and household debt."

On the same day, Chairman Kim discussed the economic situation with Kim So-young, Vice Chairman of the Financial Services Commission, and Yoo Sang-dae, Deputy Governor of the Bank of Korea. After the discussion, Chairman Kim said, "The exchange rate is exceptionally soaring, and the interest rate itself can affect housing price increases, so the Bank of Korea's basic stance is to consider whether to lower the base interest rate by taking into account the foreign exchange market, housing prices, household debt, and so on." He added, "Today, we are not concluding whether to 'lower or not lower' the rate, as this is a matter to be decided by the Monetary Policy Committee. Since the U.S. Federal Open Market Committee (FOMC) also has room for a rate cut, it seems unlikely that the Bank of Korea will make a decision independently but rather in coordination with the U.S. FOMC."

Chairman Kim also stated, "There was a demand within the special committee today to lower the interest rate."

Kim Sang-hoon, Chairman of the People Power Party's Special Committee on Stabilizing the Livelihood Economy, is speaking at the 2nd plenary meeting of the Special Committee on Stabilizing the Livelihood Economy held at the National Assembly on the 15th. Photo by Kim Hyun-min kimhyun81@

Before the meeting began, Chairman Kim publicly remarked, "According to the consumer sentiment index announced by the Bank of Korea last month, it recorded 100.9. This is a figure that could raise expectations for a recovery in consumer sentiment, but it still seems insufficient to overcome the long-term sluggishness of domestic demand." He added, "Choi Sang-mok, Deputy Prime Minister and Minister of Economy and Finance, who recently appeared before the National Assembly's Planning and Finance Committee, also pointed to high interest rates as a major cause of the sluggish domestic demand experienced by small business owners." He emphasized, "While the independent decision-making authority of the Bank of Korea in setting interest rates must be respected, I ask the committee members to speak frankly about the inconveniences felt by ordinary citizens and the public."

Deputy Governor Yoo, in his public remarks during the meeting, said, "The domestic financial system is generally maintaining a stable condition, but delinquency rates are rising due to the sluggish real estate project financing (PF) market and debt repayment burdens in vulnerable sectors." He continued, "As announced at last Thursday's monetary policy direction meeting, future monetary policy needs to maintain a tightening stance while carefully examining the conflicting policy objectives such as inflation slowdown, growth, and financial stability. It is also necessary to closely monitor how expectations of an interest rate cut might affect the foreign exchange market, housing prices, and financial stability."

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