SEOUL (Reuters) -A board member of South Korea’s central bank said on Thursday that policy coordination is required to respond to financial stability risks, after the bank held interest rates steady last month despite growth headwinds.
“While household debt growth is slightly stabilising on government measures, there still remain expectations for rises in home prices in the capital area, so it is important to respond through close policy coordination,” said Shin Sung-hwan, a member of the Bank of Korea’s seven-seat monetary policy board.
“Because there is a possibility of financial instability increasing again in the process of easing financial conditions, it is necessary to maintain the stance of tightening macroprudential policies for the time being,” Shin said, in remarks released with the BOK’s financial stability report.
Shin, known as a dove, was the sole dissenter arguing for a rate cut at the meeting last month, when the board kept the policy interest rate unchanged on housing market concerns.
Shin’s remarks follow another board member Hwang Kun-il’s comments earlier this week that it was difficult to choose when to lower interest rates, between October and November, due to financial stability reasons.
The administration of President Lee Jae Myung has rolled out two sets of policy measures to curb sharp rises in home prices since taking office in June.
Household debt growth in Asia’s fourth-largest economy accelerated again in August, after slowing to a four-month low in July on Lee’s first policy announcement in June, according to central bank data.
(Reporting by Jihoon LeeEditing by Shri Navaratnam)
