From austerity to easing after 3 years and 2 months...What's the wavelength?

■ Host: Anchor Jeong Jin-hyung and anchor Lee Eun-sol
■ Starring: Director of Long-Term Strategic Research at Daishin Securities Co., Ltd.

* The text below may differ from the actual broadcast content, so please check the broadcast for more accurate information. Please specify [YTN New Square 8PM] when quoting.

[Anchor]
The Bank of Korea's Monetary Policy Committee has shifted its monetary policy stance from tightening to easing for the first time in three years and two months. The base rate was lowered from 3.5% per year to 3.25%, a 0.25%P cut. Let's take a look at the background of the change in monetary policy and the impact on the market with experts. Daishin Securities Research Center, Director of Long-Term Strategy Research, Joint Rock, is here. Please come in. First of all, the Bank of Korea made its first cut in three years and two months after raising the benchmark interest rate, and it would be good if you could explain what the trend of the benchmark interest rate has been like so far.

[Collaboration]
It's a short period of time.There were a lot of changes in Ma. During COVID-19, it's 2020. At that time, the base rate was cut to 0.05. I cut it and then raised interest rates from August 2021 after about a year. The rate, which had been lowered to 0.5 during COVID-19, was raised to 3.5 in January last year as the base rate hike cycle continued until January last year.

[Anchor]
In fact, wasn't there an atmosphere that the increase in household debt was unusual until August, and that interest rates could not be lowered? Where do you see the background of this easing?

[Collaboration]
Wasn't the biggest reason for raising interest rates during COVID-19 because of prices? It was because of prices, and the price index has been quite stable recently. In the same case last month, the consumer inflation rate fell below the Bank of Korea's inflation target of 2%, so the 1% range came out. In that sense, according to the Bank of Korea, there are areas where prices have made significant progress, and the household debt issue has been a considerable variable when lowering interest rates over the past few months, but the growth rate has been dampened for now. I think it can be assessed that the interest rate cut was possible because there was an interpretation of the micro-alternative response through various efforts of the policy authorities.

[Anchor]
Last month, the U.S. cut its policy rate by 0.5 percentage points. So, it was a big cut, and of course, this cut must have had an impact, right?

[Collaboration]
That's right. Of course, the scheme of lowering the benchmark interest rate in Korea has been going on for quite some time. Since around summer this year, we've actually prepared for a rate cut. The Bank of Korea also continued to give signals on interest rate cuts by using the so-called blinking expression, but it seems that it was quite burdensome to do it first without the U.S. cutting interest rates, especially in September, and it seems that there is an opportunity to respond relatively comfortably in policy.

[Anchor]
I'll have to look at it as a transition period. Five out of six members of the Monetary Policy Committee believe that the benchmark interest rate will remain at 3.25% over the next three months, so what do you think about the possibility of further cuts?

[Joint Lock]
Since it literally reflects the ratio of interest rates over the past three months, President Lee Chang-yong also said today that there is room to cut the benchmark interest rate and lower it to a neutral level when he talks in between. The criteria for the reduction seem clear. However, the market believes that cutting interest rates does not mean that they will cut rates significantly or continuously like the United States, so it is likely to see the trend until about three months and then make another comeback.

[Anchor]
Governor Lee Chang-yong is not in a situation where he will make a big cut like the U.S. Now that I've said this, where is the reason?

[Collaboration]
You said it quite simply today. The interest rate cut was made with a big cut, but the U.S. had high prices and high prices, so the rate hike was quite large. In particular, didn't the U.S. raise interest rates to 5.5? And in the case of the United States, the price situation was almost 9% when prices jumped after COVID-19, so the interest rate was raised a lot. In Korea, the inflation rate was 6%, so of course, the rate hike was less, so the US had no choice but to have a large unit and Korea was relatively less able to do so, so he said very comfortably that it is not a big cut situation like the US.

[Anchor]
And he said he would decide the speed of the cut while looking at the financial stability situation. Deputy Prime Minister for Economy Choi Sang-mok said he welcomed the news while attending the parliamentary inspection. How do you see it?

[Collaboration]
If you look at it from the perspective of the government's policy authorities, you think they have an economic stimulus obligation. In particular, there are many perceptions that the domestic economy is quite bad, so I thought it would be nice to cut interest rates at some point, but the Bank of Korea failed to do so due to the household debt problem, but when we checked the process of household debt being settled to some extent, we welcome it because it lowered interest rates and acted in line with the purpose of the policy authorities.

[Anchor]
In fact, the stock market was not so good even though interest rates were cut. How did that happen?

[Collaboration]
In fact, the stock market was like that. The bond market, which has a direct impact, was also lukewarm today. In the case of stock prices, in my memory, the KOSPI rose more than 10 percentage points during the day and was pushed back at the end, but I think I had high expectations for a rate cut. In fact, market interest rates were reflected as if interest rates would be cut soon from July and August. In fact, the base rate was cut today, so the base rate became 3.25, which is much lower in the case of government bond rates by major maturity. That's why the stock market seems to have reacted that way because there were many aspects that were preemptively reflected. Rather, I would have been shocked if I hadn't cut interest rates, but I think I just reacted lightly because there are perceptions that I did what I had to do when I cut interest rates.

[Anchor]
Do you think the market interest rate will go down further?

[Collapse]
Since the market interest rate was expected to cut the benchmark interest rate immediately, interest rates fell first, so even if the market rate is lowered further in the future, the extent to which the market rate falls or falls itself is unlikely to be so large.

[Anchor]
What effect can it have on the loan interest rate?

[Collaboration]
The loan interest rate is quite distorted. In particular, there is a significant change in the decision of the base rate due to the household debt problem, so the loan interest rate is rising as the additional interest rate rises despite the cut in the base rate. These are the processes, so if you usually lower the base rate, the loan rate will also fall. As I said earlier, the loan rate has fallen a lot due to the shelf life in the market, and the household debt problem can be stimulated again, so it appears in the form of imposing additional interest rates, and as in the past, the link between the base rate and the loan rate does not look stronger than before.

[Anchor]
The headline also said that the U.S. Fed will cut only a small cut of 0.25 percentage points in November. What do you think about this?

[Collaboration]
First of all, after doing the big cut, I was very interested in the market. There were many questions about how bad the U.S. economy was to cut interest rates, but after checking the employment indicators and various indicators collected after that, the concept was that interest rates were so high that they fell hard at first. The economy is so bad that we believe there is room for a gradual reduction, not a concept of lowering interest rates, so we carried out the big cut in September, but we expect it to go in the form of a small cut in November, which is originally a normal scale.

[Anchor]
Let's stop here. We reviewed the background of the change in monetary policy and the impact on the market with Cho Dong-rak, head of long-term strategic research at Daishin Securities Research Center. Thank you for talking today.