Central Bank Chief Hints at Rate Hike

  • By Kim Shin-young

    May 28, 2021 09:42

    Bank of Korea Governor Lee Ju-yeol has hinted at raising the benchmark interest rate this year after a record period of almost zero interest.

    "The rate hike this year depends on the pace of economic recovery," Lee told reporters after a monetary policy meeting on Thursday.

    The central bank raised Korea's economic growth outlook to four percent for this year on the strength of robust exports as a result of the recovering global economy, up from three percent forecast in February.

    Bank of Korea Governor Lee Ju-yeol speaks in a press conference in Seoul on Thursday.

    But it froze the annual benchmark rate at 0.5 percent, the rate it set in May last year.

    "It's natural to readjust the unusually low interest rate that has been kept since the outbreak of coronavirus if the economic situation improves," Lee said.

    "We shouldn't hurry, but we're also taking into account potential side effects we might suffer if we take too long."

    Only last month, he said that the BOK would need to maintain the low rate until it became certain that the economy was on a recovery path.

    Lee's change of heart seems to have been prompted by a sharp increase in household debt to a record W1,765 trillion (US$1=W1,117).

    "We need to curb the sharp increase in household debt," he said. "I think we should respond before it's too late."

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