Inflation trend now sufficient to consider rate cut: BOK governor

With inflation steady at 2 percent in August, Bank of Korea Gov. Rhee Chang-yong said conditions are sufficient to consider a rate cut.

Bank of Korea (BOK) Gov. Rhee Chang-yong, center in the front row, poses for a photo with attendees of the 2024 Global Economy & Financial Stability Conference held in central Seoul on Tuesday. [BOK]

Korea’s top central banker said that the current inflation situation, with the rise in consumer prices stabilizing at 2 percent, provides a sufficient basis for a rate cut.

“In terms of inflation, the time is sufficient to consider a rate cut,” Bank of Korea (BOK) Gov. Rhee Chang-yong told the press during the 2024 Global Economy & Financial Stability Conference. The two-day event hosted by the BOK, the Ministry of Economy and Finance and the Korea Development Institute was held in central Seoul on Tuesday.

The governor added that the central bank “will assess the appropriate timing [for the rate cut decision] while taking other factors into account.”

In response to a question on whether it is safe to consider consumer prices to have fully stabilized, Rhee said, “Though it is not perfect yet, we expect at this point that [consumer prices] will move at the current level for several months unless there is a major shocks.”

Korea's consumer price index in August, announced earlier that day, rose 2 percent from a year earlier — the slowest increase since the 1.9 percent recorded in March 2021.

The BOK held the key interest rate at 3.50 percent for the 13th straight meeting on Aug. 22. During a press conference following the rate-setting meeting, Rhee said that “while the consumer price situation already constitutes sufficient grounds for a rate cut, we decided that the recent uptrend in household debt should be addressed now in order to prevent financial risks from reaching a more dangerous level.”

In August, the combined outstanding balance of household loans at the five commercial banks grew 9.6 trillion won ($7.2 billion) from a month prior to 725.4 trillion won, the steepest increase ever recorded.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]