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BOK continues to normalize monetary policy to ease 'financial imbalances'

10:00 October 15, 2021

SEOUL, Oct. 15 (Yonhap) -- The Bank of Korea will continue adjusting its accommodative monetary policy and determine the timing of another rate hike in a way that could ease "financial imbalances" caused in part by rising household debt, Gov. Lee Ju-yeol said Friday.

Lee made the remarks days after the central bank kept its policy rate unchanged at 0.75 percent for October but hinted at the possibility of an additional rate increase before the end of this year to rein in inflation and household debt.

"Financial imbalances have deepened due to the concentration of funds in the asset market and a cumulative increase in household debt, which are serving as a factor that weighs on our economy's sustainable growth," Lee told lawmakers during a parliamentary audit.

"Taking them into consideration, the BOK has steadily normalized its monetary policy stance that has been significantly eased in the wake of the COVID-19 outbreak," he added. "Going forward, the BOK will adjust the extent of its accommodative policy in accordance with improvement in financial and economic conditions."

Lee said that the South Korean economy has been on a solid recovery track, bolstered by reviving exports and facility investment, saying that such an upward trend will likely continue with the expanded vaccination, which will help ease antivirus measures that have hampered normal business activities.

Soaring household debt has been cited as a major downside risk for Asia's fourth-largest economy.

Financial authorities have tightened lending regulations to rein in household debt and inflation, and they are set to unveil additional measures next week "at the earliest," though they will likely include steps intended to help those in actual need of borrowing.

Lee said that inflation remains in the upper range of 2 percent due to both supply- and demand-side pressure and is expected to stay over the central bank's targeted range of 2 percent for the time being.

He also said that the BOK will complete research on the feasibility of a central bank-issued digital currency next year to pave the way for its introduction, while also making efforts to strengthen the overall digital payment infrastructure amid a fast transition toward the digital economy.

Bank of Korea (BOK) Gov. Lee Ju-yeol bangs the gavel to open a Monetary Policy Committee meeting at the central bank in Seoul on Oct. 12, 2021, in this photo provided by the BOK. The central bank kept its benchmark policy rate unchanged at 0.75 percent as it assessed the impact of its rate hike in August on the economy amid rising inflation and growing household debt. (PHOTO NOT FOR SALE) (Yonhap)

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