Rhee: 2 members flagged d need to ensure financial stability

Rhee: 2 members flagged d need to ensure financial stability

SEOUL (Reuters) - South Korea's central bank, the Bank of Korea (BOK), held its benchmark interest rate steady at 2.50% on Thursday, maintaining an accommodative monetary stance despite significant economic uncertainties. The decision came amidst growing concerns about household debt and potential risks to financial stability, particularly from U.S. trade tariffs [1].

The BOK's seven-member monetary policy board voted unanimously to keep the rate unchanged, aligning with the expectations of all 33 economists in a Reuters poll. In its policy statement, the central bank highlighted "significant uncertainties concerning developments in trade negotiations with the U.S. and concerning the pace of recovery in domestic demand." The statement also emphasized the bank's commitment to an easy monetary policy to support economic growth, while acknowledging the need to address rising household debt [1].

The decision was met with little reaction in domestic financial markets, as traders awaited Governor Rhee Chang-yong's press conference for further insights into the bank's rate outlook. The press conference is scheduled for 0210 GMT and will be livestreamed via YouTube [1].

In recent months, South Korea has seen a surge in home prices and household debt, driven by lower interest rates. These developments have prompted the government to introduce stricter mortgage rules to mitigate financial stability risks. Economists predict that the BOK will resume its easing cycle later this year, with at least one more 25 basis point rate cut expected to bolster the economic recovery [1].

Earlier this week, U.S. President Donald Trump announced plans to impose high tariffs on several countries, including South Korea, starting from August 1. This move has added to the economic uncertainties facing South Korea and other trading partners [1].

The government of South Korea has also taken steps to stimulate domestic demand. Last week, the government adopted a second supplementary budget for the year, including a cash handout scheme aimed at boosting economic activity [1].

References:

[1] https://www.marketscreener.com/news/latest/South-Korea-holds-rates-warns-of-significant-uncertainty-from-US-tariffs-50473916/