Monday, December 16, 2019
Bank of Korea Governor Shows Concerns over Increasing Household Liabilities
Household Debt Concerns
Bank of Korea Governor Shows Concerns over Increasing Household Liabilities
  • By matthew
  • October 28, 2014, 06:19
Share articles

The Bank of Korea, the nation's central bank.
The Bank of Korea, the nation's central bank.

 

The Bank of Korea Governor Lee Ju-yeol said on Oct. 27 that household liabilities are approaching a critical level, to possibly limit consumption.

“The increase in household debt could restrict consumption and growth and pose financial systemic risks,” he said at the parliamentary inspection by the Strategy and Finance Committee of the National Assembly that day. He added, “However, the financial risks are not high yet.” He expressed concerns over the possibility of limited consumption though. “We need to put efforts in order to curb the rate of debt increase to below the rate of income growth, not to repeat past mistakes,” he continued.

Nonetheless, the central bank recently cut the key rate. “The benchmark rate cut would add to household liabilities, but is likely to have a greater momentum for economic growth in view of economic situations as of late,” he explained.

Under the circumstances, the Fed is expected to announce the termination of quantitative easing soon, with U.S. economic indices showing positive signs. If so, the key rate hike will emerge as a factor to determine market volatility. Market participants are paying great attention to the issue these days.

“The termination of quantitative easing is around the corner, despite some financial fluctuations this month, and the recent instability of the European economy,” said Lim No-jung, investment strategy analyst at IM Investment & Securities, continuing, “Discussions about interest rate hikes will be taking concrete shape after the termination.”

The Fed is currently planning to maintain a very low interest rate for a while. “The market may fluctuate if the hawks mention the benchmark rate hike at the upcoming meeting,” the analyst pointed out, adding, “However, the impact to the market will not linger on because the possibility has been reflected since September.”