The Bank of Korea (BOK) plans to continue cutting interest rates to support economic growth, but will adopt a cautious approach. The minutes of the bank’s May 29 monetary policy meeting were released on Tuesday.
Board members emphasized the need to strike a balance between monetary policy easing and the risks it may entail. One member, in particular, drew attention to the risk of instability in housing prices and called for interest rate cuts to be cautious and gradual. Another member stated that interest rate cuts should be implemented in conjunction with targeted fiscal and financial support, so that vulnerable sectors can be supported more effectively.
At the meeting, changes in US trade and monetary policies and South Korea’s new government’s domestic policies were also considered as important external and internal factors in future monetary policy decisions.
At its meeting in May, the BOK unanimously decided to cut interest rates by 25 basis points to 2.50%. This decision was made just before the presidential election, which was won by liberal candidate Lee Jae Myung. Lee, who favors increasing government spending, is expected to announce a second supplemental budget this Thursday, following the supplemental budget of 13.8 trillion won ($10.12 billion) that was approved in early May.
