BOK in Dilemma over Rate Hike
19 June, 2021
The U.S. Federal Reserve's signal this week that it might raise interest rates sooner than expected has put pressure on the Bank of Korea to do the same.
A foreign-exchange dealer watches financial news in a bank in Seoul on Thursday. /Yonhap
BOK Governor Lee Ju-yeol last month hinted at a possible rate hike within this season, saying, "It's natural to readjust the unusually low interest that is kept since the outbreak of coronavirus if the economical situation improves."
Minutes of its monthly monetary meeting published Tuesday show members earnestly discussing the timing of a rate hike. Lee cited a faster-than-expected financial recovery and mounting household debt as the key reasons supporting it.
As of the finish of the first quarter this season, household debt soared to an archive W176.5 quadrillion, up W153 trillion on-year because of increased borrowing to buy homes and stocks. "I believe we must suppress this or pay an even bigger price later," Lee said earlier.
If rates of interest rise in the U.S. however, not here, investors could exit the Korean market to park their money where more stable interest earnings are available. Interest levels in the U.S. range between zero to 0.twenty five percent at present, and one more rate hike by the Fed could improve the rate to equal Korea's 0.5 percent.
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