The Bank of Korea yesterday held out the prospect of yet another reduction in interest rates, which are already at a record low following a cut in June.
At its monthly meeting, the monetary board of the South Korean central bank opted to keep its key rate unchanged at 1.25 percent.
The decision was widely expected, but Bank of Korea Governor Lee Ju-yeol made it clear that the bank was not ruling out an even lower rate if the economy required an additional boost.
“It is true that we will be nearing the lower limit if we continue to reduce the key rate, but we do not believe we have exhausted all our monetary policy options,” Lee was quoted as saying by the Yonhap news agency.
Most analysts believe the rate will remain unchanged for several months at least, as the bank’s board assesses the effects of its previous cut and a 20 trillion won (US$17 billion) stimulus package unveiled in late June.
South Korea posted marginally improved growth in the second quarter as exports and domestic consumption picked up.
The economy grew 0.7 percent in the April-to-June period from the previous quarter and 3.2 percent compared with a year earlier, the bank said.
“The board forecasts that the domestic economy will sustain its trend of modest growth going forward,” the board said.
However, there is growing concern over the level of household debt, which stood at nearly US$1.12 trillion at the end of March.
“I do believe there may be a need to come up with additional measures if necessary, because I believe such a steady and prolonged rise in household debt is not desirable,” Lee said.
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