By Seunggyu Lim and Cynthia Kim
SEOUL (Reuters) -A board member of South Korea’s central bank said on Wednesday household debt growth could take centre stage in policy discussions again amid an upswing in property prices, adding to views that the current easing cycle may end sooner than expected.
“The interest rate cut cycle has begun and we may be able to (additionally) cut rates without harming price stability but we might be brought back into discussions about (stabilising) home prices and household debt as we did before,” Chang Yong-sung, one of the Bank of Korea’s seven voting board members told a news conference.
“In fact the FX market situation is still on (our) mind too.”
The BOK on February 25 cut interest rates by 25 basis points to 2.75%, the third reduction since it started cutting borrowing costs from a 15-year high in October, positioning Korean rates around 150 basis points below the U.S. Federal Reserve’s target range of 4.25-4.50%.
Most analysts anticipate two more rate cuts to 2.25% by the end of the year, despite the consensus that the Federal Reserve will likely implement fewer or no cuts in the coming months.
South Korea is grappling with the economic impact of U.S. President Donald Trump’s ongoing tariff war, which is likely to undermine corporate profits. Domestic political unrest, following the brief declaration of martial law by impeached President Yoon Suk Yeol in December, also continues to dampen consumer sentiment.
On Wednesday, the government said it will tighten property market trading rules in wealthy parts of Seoul to stem any speculative transactions that have been boosting home prices in the country’s capital.
South Korea’s household debt grew 2.2% in 2024 – the fastest pace in more than two years – to 1,927.3 trillion won ($1.34 trillion), prompting the financial regulator to announce plans to tighten borrowing rules in the second half of this year.
(Reporting by Cynthia KimEditing by Ed Davies)
