The nominee for chief of the Bank of Korea (BOK) on Sunday underlined the importance of inducing controls on household debt through signals on interest rates, hinting the central bank could raise borrowing costs to address the growing debt issue.
Rhee Chang-yong made the remarks in writing in response to a lawmaker’s question on the issue of rising household debt as he prepares for a confirmation hearing scheduled for April 19, according to the BOK.
“The household debt issue is deeply related with the real estate issue and could turn into a factor that could slow down (economic) growth rates down the road, so it is a policy task that warrants urgency to stabilize the pace at which household debt expands,” Lee said.
“It is important that the BOK should induce economic players to manage household debt by using signals on interest rates,” he added.
Rhee still admitted monetary policy, including adjusting borrowing costs, is not enough to resolve the household debt issue, saying debt rescheduling and other macro policy steps are needed.
His appointment as chief central banker comes as the BOK has raised its policy rate three times since August last year, including the latest quarter percentage point increase in January, to tame inflation and household debt. The BOK is set to hold a rate-setting meeting Thursday.
Rising borrowing costs have spawned worries they could deepen the burden on households who have taken out loans to tide over the pandemic and bought homes amid soaring prices.
Source: Yonhap News Agency