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Bank of Korea's Chang says need to monitor household debt growth

Published: 19 Mar. 2025, 18:46

Chang Yong-sung, one of the Bank of Korea's seven voting board members speaks during a news conference in Seoul on March 19. [BANK OF KOREA]

A board member of Korea's central bank said Wednesday that household debt growth could take center 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 cut rates without harming price stability, but we might be brought back into discussions about home prices and household debt as we did before,” Chang Yong-sung, one of the Bank of Korea's (BOK) seven voting board members, said in a news conference.

“In fact, the FX market situation is still on [our] mind too.”

The BOK on Feb. 25 cut interest rates by 25 basis points to 2.75 percent, 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 percent.

Most analysts anticipate two more rate cuts to 2.25 percent by the end of the year, despite the consensus that the Federal Reserve will likely implement fewer or no cuts in the coming months.

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 speculative transactions that have been boosting home prices in the country's capital.

Korea's household debt grew 2.2 percent 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.

Reuters