The Bank of Korea Plans Long-Term Tightening Monetary Policy for 2024

[비즈니스포스트] The Bank of Korea announced a plan to implement monetary policy while maintaining a long-term tightening stance next year.

The Bank of Korea said in its report on ‘2024 Monetary and Credit Policy Implementation Guidance’ on the 29th, “The base interest rate will continue to tighten for a long enough period until it is certain that the inflation rate will stabilize at the target level (2%).”

▲ The Bank of Korea announced plans to maintain a long-term austerity stance next year.

As the United States Federal Reserve (Fed) suggested an interest rate cut in 2024 through a dot plot, it suggested that tensions over prices cannot be let go while expectations for an interest rate cut are also rising in Korea.

This is because it is expected that more time will be needed even though the inflation rate is stabilizing.

The Bank of Korea said, “The inflation rate will continue to trend downward, but it is only expected to fall to the target level after the fourth quarter of next year. We must also consider the need to implement monetary policy while addressing debt households.”

In particular, the inflation rate trend is expected to be in the mid-2% range and low-to-mid 2% range for consumer prices and core prices (excluding food and energy) in 2024, respectively.

Depending on the direction of the Bank of Korea’s monetary policy, it was decided to consider various factors as maintaining high interest rates for a long period could lead to a contraction in the economy.

The Bank of Korea said, “We will make a decision by closely examining the economic situation, financial stability risks such as household debt, changes in monetary policy in major countries, and geopolitical risks, along with price trends.”

Even as real estate (PF) project financing risks have recently increased, the financial system is expected to be able to maintain stability given the high capital ratio that is above regulatory levels.

However, attention was also drawn to the possibility of an increase in risk.

The Bank of Korea said, “There is a potential for liquidity and credit risks related to PF real estate, etc. to emerge,” and added, “As the high interest rate level continues for a long time, there is also a possibility that the ability of marginal companies and vulnerable households to repay debts will decline.” . Reporter Jo Hye-kyung

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