BOK Board Member Chang Urges Caution in the Real Estate Market

Amid concerns over the real estate market and household borrowing in South Korea, Bank of Korea (BOK) board member Chang Yong-sung emphasized the need for continuous monitoring in these areas. According to the minutes of the central bank's recent meeting, Chang, who voted against the interest rate cut decision, highlighted the risks associated with an early rate reduction.

On October 11, BOK decided to lower the policy interest rate to 3.25% with a vote of 6 to 1, in response to increasing uncertainties regarding the country’s economic output and inflation rates that fell below the bank's 2% target in September. However, Chang warned that lowering the interest rate could potentially lead to further increases in property prices. To allow for more time to assess trends in housing prices and household borrowing, he argued for maintaining the policy interest rate at its current level of 3.50%.

Most of the BOK board members acknowledged a reduction in systemic risks associated with household debt, noting that housing prices began stabilizing in September, while also stressing the need to consider global oil prices. The board noted that escalating geopolitical tensions in the Middle East could drive energy prices higher and increase South Korea's import costs.

In a statement on Tuesday, BOK President Rhee Chang-yong provided an updated outlook on the country's economic growth, indicating that the fourth-largest economy in Asia is expected to grow by about 2.2% this year, slightly down from the previous forecast of 2.4%. This revised estimate reflects the challenges faced by the South Korean economy in a complex global economic environment.