BOK Governor warns of faster-than-expected metropolitan real estate price increase

The Bank of Korea has frozen its benchmark interest rate for the 12th consecutive time, marking its longest period of unchanged rates. This decision reinforces the central bank's commitment to maintaining the benchmark interest rate at 3.50 percent annually despite the challenges posed by soaring home prices, especially in the metropolitan region, a surge in household debt, and a depreciating value of the won. The BOK's Monetary Policy Board convened on Thursday to assess monetary policy direction and opted to maintain the rate, which has remained unchanged since January 13th of last year, totaling one year, five months, and 28 days.

One of the factors causing hesitation for the BOK to 'pivot' is the recent surge in metropolitan real estate prices. “The pace of real estate price growth in the metropolitan area has been faster than expected,” Rhee explained at a press conference after the meeting, adding, “There is a consensus among board members that the BOK should avoid policy mistakes such as injecting excessive liquidity or sending the wrong signals about the timing of interest rate cuts, which could lead to further increases in home prices.”

Rising household debt is also a concern. “The expectations for rate cuts in the market right now are a bit excessive,” Rhee said, “and we don't want those expectations to fuel higher real estate prices.”


조응형 기자 yesbro@donga.com