Interest Rate Cut Expectations Grow in​ Korea Amid US ‘Big Cut’

As​ the US implements the ‘big cut’, expectations for an‌ interest rate cut ‍are also⁣ growing in Korea. The government ⁤and the ruling party are of the position that interest rates should be lowered quickly to revive the sluggish domestic economy.

The ⁢government expressed its expectations, with the US Federal Reserve’s shift in monetary policy seen ⁤as a sign of ⁤recovery from ⁢the crisis.‌ According to Deputy⁤ Prime Minister‍ and Minister of Economy and Finance, Choi Sang-mok, “It is ⁤an emerging global complex crisis triggered by the over-liquidity caused​ by the pandemic‍ response and supply chain shocks such as the Russia-Ukraine war.”

However, he emphasized that he would⁣ prepare for situations like⁢ the ⁤stock market crash in early August and ⁣respond ​boldly to an overheated housing ‍market or an​ increase ⁣in household debt. The ruling⁢ party has maintained its position that the⁢ Bank of Korea should lower ⁣interest rates as soon as possible, taking into account the sluggish ‍consumption caused by the burden of interest.

The⁢ key ​is timing. The earliest the Bank of⁣ Korea’s Monetary Policy‌ Committee ⁢meeting, which will decide interest rates, will ​be⁢ held is the 11th⁣ of ⁢next month. According to Cho Young-moo, a researcher at LG Economic Research Institute, “Given that the US⁢ rate cut was large and that⁤ strong ⁣policies are likely ‌to lower the growth⁢ rate​ of ‌household debt,​ the possibility of a rate cut by the‍ Bank​ of Korea in October appears to be gradually increasing.”

The Bank of Korea⁢ assessed that “the room to operate monetary ‌policy while taking into ⁤account domestic economic conditions, prices, etc. has⁣ increased.” However, this may be based on the ⁢premise of ‘domestic factors’ ⁢such as ‍real estate prices and household debt. According to Huh Joon-young, a professor of economics at ​Sogang University, “(The loan regulation) will likely ‍have visible results for a month or two, and the Bank of Korea⁤ may‍ be able to lower interest⁤ rates after confirming that household loan growth has slowed down a bit. ‌A⁤ November rate cut seems a⁤ more‍ reasonable scenario than an October rate cut.”

Ultimately, it appears that the household loan index until early⁢ next month will be the ‘barometer’ for interest rate cuts. In⁢ relation to this, ⁢the​ government stated that the increase is expected to slow down as the effects⁢ of household ⁤loan ‍regulations become visible this ‌month.

This is Kim Geon-hui of MBC ⁤News.

Video coverage: Jeong ⁢In-hak ⁣/ ​Video editing: ⁢Min Kyung-tae