Bank of Korea board divided on rate cut timing; minutes show

South Korea’s central bank policymakers was split on the timing of interest rate cuts, with most members worried about potential housing market price increases, according to minutes from the July monetary policy meeting released on Tuesday.

The Bank of Korea (BOK) discussed preparing for a shift to lower interest rates at its July meeting after maintaining the benchmark rate at 3.50 per cent for the 12th consecutive meeting.

A majority of the seven-member board expressed worries that lower borrowing costs could exacerbate the already inflated housing market in Seoul, leading to financial stability risks.

However, other members emphasised the need to prevent an economic slowdown and preserve a soft landing.

Despite inflation easing to a near-target level of 2.4 per cent in June, the BOK remains cautious about potential upside risks.

Additionally, the unexpected contraction of the South Korean economy in the second quarter has intensified calls for monetary policy accommodation.

While the central bank acknowledges the need for a rate cut, the timing of such a move will depend on various factors, including medium-term inflation, macroeconomic conditions, and foreign exchange market developments.

Attribution: Reuters & BOK’s Monetary Policy Board Meeting minutes