S. Korea’s Central Bank Flags Debt, Housing Prices as Key for Rate Cuts
(MENAFN) South Korea’s central bank emphasized on Thursday that household debt levels and housing market trends will heavily influence the timing of any further interest rate reductions.
In its latest biannual monetary policy report, the Bank of Korea (BOK) stated that economic growth projections, alongside the stability of household borrowing and the housing sector, will play a crucial role in deciding both the timing and scale of future interest rate cuts.
Highlighting the need for additional policy measures, the BOK noted the Asian economy’s recovery had shown improvement but remained below its potential growth rate, necessitating continued support.
The central bank highlighted the continuous increase in housing prices in Seoul, along with sustained expectations of further price gains. It emphasized the need to carefully time any additional policy rate cuts by closely monitoring the effects of recent housing supply initiatives and how monetary easing influences market expectations for housing prices.
Household debt held by deposit-taking banks reached 1,168.3 trillion won (approximately 838.8 billion U.S. dollars) at the end of August, marking an increase of 4.1 trillion won from July, and continuing a growth trend since February that outpaced the 2.7 trillion won rise recorded in July.
Signs of a recovering real estate market were evident, with apartment transactions nationwide rising from 45,000 in May to 53,000 in June before slightly dropping to 34,000 in July.
The BOK has lowered its benchmark interest rate by 25 basis points four times since last October, including cuts in October and November 2024, followed by reductions in February and May 2025, bringing the rate to 2.50 percent. (1 won equals 0.00072 U.S. dollars)
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