Bank of Korea Gov. Lee Ju-yeol said Friday that the central bank plans to sustain its accommodative monetary policy stance in the second half of the year if economic recovery remains lackluster.
“(The BOK) will likely proceed in the direction of sustaining its accommodative stance as it is difficult to be positive about domestic economic recovery,” the top central banker said in a speech marking the BOK’s 65th anniversary. “Policy circumstances may rapidly change due to factors such as a possible U.S. rate hike, but there is a need to be prudent in adjusting the stance of the monetary policy if economic recovery is insufficient.”
The latest remarks underscore the BOK governor’s stance that South Korea does not have to immediately track the U.S. policy move that is expected later this year.
Lee also touched on the country’s sluggish exports, warning that the trend may continue into the later half of the year, which market watchers fear will potentially drag down growth in Asia’s fourth-largest economy to below 3 percent.
The warning comes after South Korea’s exports tumbled 10.9 percent in May from a year earlier, the biggest drop in almost six years, due to the global economic downturn and low oil prices.
“It is difficult to rule out the possibility of sluggish exports continuing into the second half on China’s slowing growth and import substitution policy, as well as a weak yen and euro, that have hit the price competitiveness of local firms,” he said.
The BOK chief also stressed the need to step up countermeasures against the country’s ballooning household debt.
“If the current pace of rapid growth persists, it may constrict household spending and unsettle the local financial market. Therefore, (we should) closely cooperate with the government and the regulator to counter the household problem more actively,” he said.
Household debt has been trending higher following three rate cuts after August last year, with the total amount reaching 1,040.4 trillion won ($935.9 billion) as of the end of March, up 12.8 trillion won from three months earlier.
The amount is expected to climb further after the BOK delivered its fourth rate cut since August on Thursday, sending the base rate to a new low of 1.5 percent. (Yonhap)
