Comments from Monetary Policy Committee Member Advocating Rate Freeze... "Very Concerned About Rapid Rise in House Prices"

On the 11th, the Financial Monetary Policy Committee was held at the Bank of Korea. On this day, the Bank of Korea lowered the base interest rate by 0.25 percentage points. Photo by Joint Press Corps

On the 11th of this month, the only Monetary Policy Committee member who dissented with a freeze when the Bank of Korea lowered the base interest rate was found to have been greatly concerned about the increase in household debt due to the rapid rise in housing prices in the Seoul metropolitan area at the time.

According to the minutes of the Monetary Policy Committee released by the Bank of Korea on the 29th, Jang Yong-seong, the only committee member who proposed a dissenting opinion to maintain the rate during the rate cut on the 11th, stated that "considering the weak domestic demand including sluggish construction, and the high delinquency rates in some vulnerable sectors, the environment for a rate cut has been sufficiently established."

However, he emphasized, "The rapid rise in real estate prices in some areas of the Seoul metropolitan area and the resulting expansion of household debt are very concerning," adding, "The increase in real estate prices in specific regions deepens asset inequality and can further hinder the efficient allocation of economic resources."

He noted, "Fortunately, thanks to the government's active macroprudential policies, the rate of increase in housing prices and household debt in these areas has somewhat stabilized," but also said, "Concerns about supply shortages in preferred areas and other factors causing housing price instability remain."

He also stated, "Expectations of monetary policy easing may reignite the upward trend in housing prices," and added, "Therefore, it is desirable to freeze the base interest rate at the current level of 3.5% to allow more time to observe the trends in housing prices and household debt, while monitoring the monetary policies of major countries and the process of real estate project financing (PF) cleanup to determine future policy directions."

Commissioner Jang said, "Private consumption has been depressed due to prolonged high interest rates and inflation, and among these, the high price level caused by accumulated inflation is a major factor restricting consumption," adding, "In that sense, even if the inflation rate has come down to the target level, maintaining a steady stabilization stance will help improve households' real purchasing power and the recovery of private consumption."