On the 28th, Bank of Korea Governor Lee Chang-yong said, "There is a strong possibility that the trend of interest rate cuts will be maintained until the first half of next year, where low growth below the potential growth rate is expected."
Governor Lee made this remark during a press conference held after the Monetary Policy Committee decided to freeze the base rate at 2.50% per year, saying, "Korea's economic growth rate is expected to remain low until the first half of next year and then rise to a level close to the potential growth rate in the second half."
However, he noted, "(The continuation of interest rate cuts) is based on an assumed growth rate of 1.6% next year," adding, "If the growth rate forecast for next year changes in the revised economic outlook this November, the currency policy stance may also change."
The Bank of Korea's Monetary Policy Committee decided to freeze the base rate at 2.50% per year. This decision was made amid concerns over rising household debt and increasing housing prices.
Governor Lee stated, "After the implementation of the government's household debt measures, the upward trend in housing prices and transaction volumes in the metropolitan area has slowed, and the level of increase in household loans from financial institutions has also significantly reduced," while also noting, "The rise in housing prices in preferred areas of Seoul continues, and expectations for further increases remain."
The governor also made it clear that there are limits to stabilizing the housing market through currency policy. He stated, "There is a misunderstanding that the Bank of Korea is trying to control housing prices through interest rate policies," emphasizing, "It is not possible to control housing prices with interest rates."
He added, "To stabilize the housing market, various government supply policies related to real estate are needed, and currency policy needs to coordinate with them," stating that "the Bank of Korea will not encourage expectations of rising housing prices by oversupplying liquidity."
The governor evaluated the results of the meeting between President Lee Jae-myung and U.S. President Donald Trump as "very positive."
He remarked, "The results of the Korea-U.S. summit are not significantly different from the results of the tariff negotiations earlier this month," adding that "thanks to the smooth summit, there was less pressure to freeze interest rates." He continued, "If the results had been negative, the trade-off between growth and financial stability would have become more pronounced, making it considerably burdensome to decide on a rate freeze."
He pointed to 'the possibility that tariff negotiations with the U.S. could be reignited' as a downward factor for the economy. The governor explained, "If automobile manufacturers increase local production to avoid U.S. tariffs, conflicts between labor and management may spread," and stated that "even if conflicts arise due to industrial restructuring in real estate project financing and petrochemicals, the economy will be affected in the short term."
On that day, five out of the six Monetary Policy Committee members, excluding the governor, expressed their opinion that the possibility of an interest rate cut should be kept open within the next three months. The governor noted, "They mentioned that the Korean economy is expected to maintain a growth rate lower than its potential level," and said, "Let's keep the possibility of further cuts open and assess the upward and downward risks as well as financial stability."
He then mentioned that 'the remaining member who expressed the opinion that there is a high possibility of maintaining the rate at 2.5% said that it takes sufficient time for financial stability risks to be adequately resolved, so it is necessary to assess the economic situation within the next three months.'