Lee Chang-yong: "All Monetary Policy Committee members keep possibility of 3.75% interest rate open... Too early to discuss rate cuts within the year"

"US Monetary Policy and Household Loans as Upward Factors"

Lee Chang-yong, Governor of the Bank of Korea, said on the 24th, "When deciding this monetary policy direction, all members of the Monetary Policy Committee expressed the opinion that the possibility of raising the base rate to 3.75% in the near term should be kept open."

Governor Lee made this remark in response to a question about the direction of the base rate within the year during a press conference held immediately after the Monetary Policy Committee meeting.

The Bank of Korea's Monetary Policy Committee, which convened that morning, set the base rate at 3.5%, maintaining the freeze stance for the fifth consecutive time since February.

Governor Lee explained the reason for the possibility of a rate hike, saying, "Uncertainty regarding the U.S. Federal Reserve's (Fed) monetary policy is high, and we cannot rule out the possibility of significant volatility in the foreign exchange market following the upcoming Jackson Hole meeting or next month's Federal Open Market Committee (FOMC) meeting," adding, "If volatility in the foreign exchange market increases, price volatility also increases."

The increase in household loans is also an upward factor. Governor Lee said, "Compared to a few months ago, the instability of some non-financial institutions has greatly improved under the current situation," but added, "Unexpectedly high household loans have increased, so it is necessary to monitor whether this upward trend will continue."

Regarding the possibility of a rate cut next year, Governor Lee said, "I cannot specify the timing," but drew a line on the possibility within this year. He stated, "There are individual differences among Monetary Policy Committee members regarding how seriously they view the current situation depending on medium- to long-term changes in household debt," but added, "Since we are talking about the possibility of a rate hike, a rate cut is premature."

When asked whether Korea could lower rates before the U.S., he replied, "We need to assess the situation as it unfolds." Governor Lee said, "If the U.S. monetary policy stance continues to be tight, we will discuss with the Monetary Policy Committee members and consider micro-adjustment methods."