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| Bank of Korea Governor Lee Ju-yeol speaks during a press conference at its headquarters in Seoul, Wednesday, after holding a monetary policy board meeting. Courtesy of Bank of Korea |
By Lee Min-hyung
The Bank of Korea (BOK) does not have any immediate plans to apply quantitative easing measures by increasing bond purchases, as the economy is on track for gradual recovery amid diminishing signs of virus-induced uncertainties, BOK Governor Lee Ju-yeol said Wednesday.
"It is premature for us to introduce such quantitative easing measures, but we will keep an eye on any potential bond market jitters stemming from imbalance in supply and demand," Lee said in an online press conference.
Last month, the central bank decided to purchase state bonds worth 5 trillion won ($4.37 billion) by the end of this year, in a preemptive step to stabilize the bond market during the second wave of COVID-19 infections here. The BOK has since bought 2 trillion won of government bonds.
Lee, however, opened the possibility of expanding the scale in line with market conditions.
"We will purchase state bonds worth 3 trillion won throughout the year as planned, but the central bank will flexibly deal with any potential changes in market circumstances," he said.
He also said the central bank would have more leeway in carrying out its policy, as other major economies ― such as the United States ― are expected to keep their benchmark interest rate lower than that of the BOK.
The remark is in sync with the U.S. Federal Reserve's recent decision to maintain a near-zero interest rate policy through 2023 over fears of a pandemic-driven prolonged economic downturn. In May, the Fed slashed its key rate to a range of 0 percent to 0.25 percent.
The BOK's monetary policy board left its benchmark policy rate unchanged at 0.5 percent at its meeting Wednesday.
"The central bank will continue to maintain the monetary easing policy to speed up economic recovery here," Lee said.
The governor also expressed concern over the steep rise in household debt this year.
"The amount of household loans increased by more than 5 percent in the second quarter, compared to a year ago, and the figure has been on a steep rise, particularly after June, due to an increase in demand for stock investment," he said.
Households have a tendency to borrow more when the interest rate falls, so the BOK will keep a close watch on whether the figure continues to surge, he added.
"The BOK's monetary easing was inevitable to overcome the COVID-19 crisis," Lee said. "For now, we have no choice but to continue the stance until economic growth gets back on track. But it is hard for us to predict when exactly it will be."
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