BOK extends interest rate freeze amid soaring home prices

Aug 23, 2024, 10:19 am

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Bank of Korea Gov. Rhee Chang-yong announces the rate decision during a press briefing held at the central bank in Seoul on Aug. 22, 2024./ Source: Joint Press Corps

AsiaToday reporters Lee Choong-jae & Hong Sun-mi

The central bank has kept interest rates unchanged on Thursday, maintaining its monetary tightening stance. The decision came amid concerns about growing household debt and housing prices.

The Bank of Korea (BOK) has held its benchmark interest rate steady at 3.5 percent following the second monetary policy committee meeting of the second half of the year. This is the 13th time in a row that the BOK has decided not to change the rate, its longest rate freeze streak.

BOK Gov. Rhee Chang-yong said rising household debts and home prices should be dealt with immediately to ensure financial stability. “The rate freeze decision was unanimous among the monetary policy committee members,” he said.

Rhee pointed out the problem of policy responses that stimulate the real estate market when the economy worsens, saying that “it’s time to break that cycle.” He said the central bank should not make the mistake of excessively supplying liquidity and stimulating real estate prices.

The presidential office expressed disappointment over the BOK’s decision.

“The interest rate decision lies within the authority of the Monetary Policy Board, but it is disappointing from the perspective of boosting domestic consumption,” a senior presidential official said in a rate remark on the rate decision.

The presidential office believes there is no reason not to lower the base interest rate as prices are stabilizing. The central bank lowered its GDP growth forecast for this year from 2.5 to 2.4 percent due to sluggish domestic demand, providing sufficient justification for lowering the interest rate.

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