[Click eStock] "Han Eun Monetary Policy, Difficult to Ignore Household Loan Increase"

On the 20th, IBK Investment & Securities predicted regarding the Bank of Korea's monetary policy that "it will be difficult to overlook the increasing trend of bank household loans."

On the same day, Kwon Ki-jung, a researcher at IBK Investment & Securities, said, "This week, the biggest concern in the market will be the upcoming Bank of Korea Monetary Policy Committee meeting on the 23rd, a major event. In particular, attention will be focused on the Bank of Korea's announcement of revised economic forecasts."

He first stated, "There is a considerable aspect that has already been priced in by the market, and some degree of prediction is possible. For example, considering the domestic first-quarter Gross Domestic Product (GDP) surprise, the economic growth forecast is expected to be revised upward," and he predicted, "The domestic first-quarter household credit data to be released on the 21st will also be an economic indicator that the market should pay attention to."

Researcher Kwon said, "Unless the indicator itself records a surprise-level figure (for example, exceeding 1.9 trillion won), it may not immediately have a significant impact on domestic interest rates," but added, "The easing of tightening pressure in the first quarter of this year led to an increase in bank household loans in the first quarter. Recently, the government bond yield has fallen below 3.5% amid downward pressure, and bank household loans increased again as of last month."

He also said, "Bank of Korea Governor Lee Chang-yong stated that it is difficult to solve the chronic domestic problem of household debt with monetary policy alone, but it will be impossible to overlook the household debt issue."

Lee Chang-yong, Governor of the Bank of Korea, is striking the gavel at the Monetary Policy Committee meeting held on the 12th of last month at the Bank of Korea in Jung-gu, Seoul. Photo by Joint Press Corps

He emphasized, "Fortunately, according to a recent report on household debt in major countries published by the Institute of International Finance (IIF), the ratio of Korean household debt to GDP compiled by the IIF fell below 100%. However, it is still a high figure at 98.9% and remains the highest level among major countries. In addition, domestic corporate debt also recorded a high figure. Although it is not the highest among major countries, it is the same as the previous year’s quarter and still ranks among the top."

Regarding domestic bonds, he pointed out that "a conservative investment strategy is needed for a while." Researcher Kwon said, "Meanwhile, it has been confirmed that foreign investors have little incentive for arbitrage in the foreign exchange swap (FX swap) market. This is presumed to be due to improvements in the domestic foreign currency funding market and maintained expectations for interest rate cuts by the Federal Reserve and the Bank of Korea within this year," adding, "Considering recent remarks by Jerome Powell, Chairman of the U.S. Federal Reserve, and the market atmosphere, the possibility of a Fed rate hike is unlikely to be highlighted for the time being, which could make it difficult for domestic interest rates to face relative upward pressure."