Water price emergency during the kimchi-making season...Oil prices from the Middle East are strong 'variables'

■ Host: Anchor Kim Youngsoo Kim, Anchor Kim Jung-jin
■ Starring: Son Seok-woo, Economic Critic

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

[Anchor]
Today, let's take a look at the economy-related news. The biggest interest is whether the Bank of Korea will cut its benchmark interest rate for the first time in three years on the 11th. If we get off, we will see how it will affect our financial market and real estate market.

[Anchor]
I'll also check the prices today. In particular, ahead of the kimchi-making season, the price of cabbage and radish has risen significantly compared to last year, so you will be worried about when to make kimchi. Economic News Today, let's take a look at it with Son Seok-woo, an economic critic. Welcome.

[Anchor]
I just gave you the news of the Middle East war, but gasoline prices in Korea are stabilizing right now, right?

[Son Seok-woo]
It has been falling for about two months. Until last week, gasoline and diesel prices continued to decline for 10 weeks as of the first week of October. Gasoline prices have entered the 1,500 won range from 1,600 won per liter in 33 weeks. Of course, the situation in the Middle East continues to be unstable, but until September, international oil prices seemed to reflect the sluggishness in economic indicators such as China and Europe.

So, even if the situation in the Middle East is unusual, the international oil price temporarily rose and then fell below $70 again. Due to that effect, domestic gasoline prices continued to stabilize. Also, didn't the government take additional measures to cut oil taxes last August?

Currently, gasoline is offered to consumers at a 20% discount. These effects can be seen as the main background of the continued stability of domestic gasoline prices.

[Anchor]
As you pointed out earlier, the problem now is international oil prices. The situation in the Middle East continues to be a variable and international oil prices are rising, but there are also talks of more than $100 per barrel. What do you think?

[Son Seokwoo]
Last week, the situation in the Middle East was a bit unusual. Once Iran hit three military bases in Israel, the situation in the Middle East was set to escalate again, and as a result of this overall effect, the West Texas Intermediate and Brent crude, which we often see, soared to the $70 range.

There were days when it went up more than 5% in one day. In particular, it was a mistake by U.S. President Joe Biden to add fuel to international oil prices. There was news that Israel had received a missile strike from Iran and was now preparing for a retaliatory strike, and specifically, there was a prediction that Israel would hit Iran's oil base, and President Joe Biden is considering it in response to a reporter's question, which led to the prevailing observation that an air strike was imminent.

International oil prices have soared on this news. Although President Biden has made a significant impact and belatedly started to deal with it, the possibility of Israeli airstrikes on Iran, and international oil prices continue to soar to $75 today.

[Anchor]
Although the price of gasoline in Korea is stable, if international oil prices rise further, the price of gasoline in Korea will also rise. Korea's inflation rate, which was recently announced, fell to the 1% range. But if international oil prices continue to rise, won't this price also rise again?

[Son Seokwoo]
That's a possibility. Of course, it will be reflected in Korea's energy price with a time difference, but I think it is usually reflected with a time difference of 3 to 4 months. So, the sense of crisis in the current situation in the Middle East and how long the geopolitical risks will be, I think this will be the key.

Now, the prediction is that Israel is likely to launch retaliatory strikes in some way, and as I said, if it hits Iran's oil base, it could be quite serious. First of all, in the case of Iran, it accounts for only 3-4% of the international market's crude oil supply, but the important thing is that it has increased crude oil production rapidly this year.

To break the internal economic crisis. And in the case of Iranian crude oil, China is also the most bought country. Under these circumstances, if Iran's oil base is attacked, international oil prices could soar, and if Iran goes through proportional retaliation again, for example, if it cuts off places like the Strait of Hormuz, 30 to 40 percent of the world's crude oil flows through it, so I think it could have a significant impact on international oil prices and on the rise of domestic energy prices with a time lag.

Naturally, prices have fallen to the 1% level for the first time in three and a half years, and the main reason for the decline is that energy prices have been quite stable over the past few months, so I think we can be worried that the international community's current trend is putting cold water on our stable prices.

[Anchor]
As you said earlier, the inflation rate is now at its lowest level in three and a half years. 1. It's down to the 6% range. Ahead of the kimchi-making season, news continue to be heard that the price of a head of kimchi cabbage is close to 10,000 won. What is the current situation? Is it a bit off now?

[Son Seokwoo]
Yesterday, I went to the local mart and looked at the price of cabbage and radish, and it fell a little. It did fall off. It's 8,000 won for a cabbage and 4,000 won for a radish. I think it's definitely down from last week, but there was also a recent import of Chinese cabbage. Didn't the weather get cooler recently?

At the same time, it is believed that the supply has improved as growth has improved somewhat, and the price has fallen accordingly. As expected, it is still expensive compared to the previous year and the average year. Cabbage prices are still 26% higher than a year ago. Compared to the average price over the past three to four years, it is also more than 50% expensive.

In October, so will cabbage continue to be expensive this month or will it drop a little? Recently, the Korea Rural Economic Research Institute published an outlook report on cabbage prices in October. Based on the wholesale price of cabbage this month, 15,000 won based on 10kg. It is predicted to be 38.4% higher than a year ago.

Of course, it is about 40% lower than the price in September, but it is still about 40% higher than the average price. However, as so-called autumn cabbage is shipped after the middle of this month, the price is expected to gradually fall. The price of radish, a kimchi ingredient, is similar and still high compared to the average year, but the price is expected to fall after the middle of this month when radish is shipped in earnest from the highland area.

Fruit prices were expected to fall slightly. Apples are expected to fall to around 30% and pears to around 25%.

[Anchor]
Is that why the government asked you to delay the kimchi-making period?

[Son Seokwoo]
That's right. As I said, if autumn cabbage comes out in earnest from November, it will certainly reduce the cost of kimchi for those who prepare kimchi from then on. Looking at the cost of making kimchi a year ago, it was 350,000 won for a family of four if you do it at a traditional market, and a little over 400,000 won if you prepare it at a mart.

However, since the level has risen a lot now, there are many people interested in how much kimchi will cost this year, but it is predicted that it will cost at least 1.5 times more than a year ago. However, as expected, if autumn cabbage is in a good crop and the supply is smooth, autumn cabbage prices will fall a lot and the cost of kimchi will be reduced.

[Anchor]
We've been looking at cabbage prices, radish prices, and kimchi ingredients, and in general, the inflation rate has stabilized, but I'm not sure about the economic experience. I think there will be a lot of people who feel that prices are still high. How should I interpret this?

[Son Seokwoo]
Perhaps few people agree when you heard that September consumer prices were announced this week and prices fell to the 1% range. It still feels high. So when you say that the inflation rate is on the screen right now, but you're measuring it and you're raising it by a certain percentage compared to a year ago, you're thinking like this.

However, the period when prices have risen so much has continued for nearly three or four years, and if you take into account the accumulated inflation, people can't easily feel that prices have fallen because they think they've already risen a lot. For example, I'm carrying a 100kg back on my back, and I lost about 5kg from there, so I'm sure few people think I've become lighter. And the price of a product, for example, that has already risen once, is not easy to fall or freeze just because the price has fallen to, for example, the 1% range.

If you go up once more, you go up, because it doesn't fall down. For example, jajangmyeon is about 8,000 won these days. Just because the inflation rate has fallen to around 1%, it falls below 8,000 won, or it is not. It went up if I went up more. Because of these things, you seem to think that the perceived price is still high, and then the items we buy often are still not falling off.

If you think about the price of cabbage, radish, and vegetables that you buy every day from the beginning of this year, these things have been very expensive due to climate change. Because of these things, there's still a lot of money going out of my pocket, so why are you saying that inflation is falling, and I think that's where the gap is happening.

[Anchor]
If prices find stability, it has been difficult for the Bank of Korea to lower interest rates because prices have been high. If prices find stability in the 1% range, the biggest interest is whether to lower interest rates, but I heard that the Monetary Policy Committee will decide interest rates on the 11th. What do you think will happen?

[Son Seokwoo]
The view that the overall atmosphere is likely to change rapidly in recent years is a little more dominant. Then we can make a decision to cut the base rate by 0.25 percentage points from the current base rate of 3.5%, and if we do, we first raised the rate in August 2021 and started tightening monetary policy. Then, after three years and two months, the decision will be made to change the direction of interest rates from tightening to easing again.

Then why has the atmosphere changed rapidly recently? The first goal of monetary policy I mentioned earlier is price stability. However, prices have stabilized gradually in the second half of this year. Eventually, prices fell to the 1% range last month. In determining monetary policy, the Bank of Korea currently sets the target for price management at 2%. Prices have now fallen below

2%, so if you look at prices alone, you can see that an environment has been created to lower interest rates sufficiently. The last remaining variable was house prices, and the Bank of Korea is still worried about house prices. However, if the rate cut is delayed until the house price is completely stabilized, there are too many constraints on consumption, investment, production and the domestic economy, so it is currently unreasonable to delay the rate cut until the house price is fully established. Recently, the governor of the Bank of Korea Lee Chang-yong visited the Ministry of Economy and Finance for the first time since the government was established.

I visited and had a so-called town hall meeting with the Ministry of Economy and Finance, and what I emphasized at the meeting was policy cooperation. When it comes to policy cooperation, it means that the monetary policy of the Bank of Korea and the fiscal policy of the fiscal authorities are in harmony with each other. This is interpreted as a preliminary measure to prepare for a cut in the benchmark interest rate.

Under this consensus, the creation of such policy cooperation between the Ministry of Finance and the Bank of Korea has created an atmosphere to lower interest rates. The current market's observation is that the appropriate time will now be this month.

[Anchor]
House prices continue to emerge as a variable in the end of interest rate decisions. How is the housing price stability these days? Whether we're entering a steady state.

[Son Seokwoo]
The upward trend continues. But as I said here last time, I told you that the increase is decreasing. It continues to be in that trend even now. According to the change rate of the National Apartment Price Index in the last week of September released by the Korea Real Estate Agency, the rate of increase was 0.02%, compared to the previous week.

This is because the rate of increase has decreased compared to the previous week. The same goes for Seoul. Gyeonggi and Incheon were all the same. If this happens, the trend of the rise in housing prices in Seoul and the metropolitan area, which we are watching the most right now, is slowing down a little. This trend is continuing. In particular, what we are seeing in the Seoul area is that the three Gangnam districts are leading the housing prices in Seoul, so if you look at the Gangnam area in Seoul, all three Gangnam districts are seeing a decrease in the increase compared to the previous week.

The reason is that overall loan regulations and then in July and August, there was a lot of increase. Therefore, as fatigue that caused short-term housing prices to surge accumulated, the overall rate of increase decreased and the buying sentiment itself was slightly dampened.

Another thing I'm looking at about this is that you're taking out a lot of loans and loans are flowing into the housing market. So, as I told you earlier about the aftermath of the loan regulation, it's the best. In fact, overall household loans decreased significantly last month compared to the previous month.

So, if you look at the increase in household loans in the financial sector last month, it fell to the early 5 trillion won range.
But in August, the increase in household loans was 9.8 trillion won. So, this trend has been reduced by nearly half, and the key is the mortgage loan, but when I looked at how much the mortgage loans have decreased, the net increase has decreased by about 20% compared to the previous month.

If you look at these overall trends, you can see that the rise in house prices is decreasing significantly.

[Anchor]
We've looked at the impact of interest rate cuts on the real estate market. Now, it will affect the financial market, especially in the case of the stock market, interest rate cuts are a good thing. Recently, however, there has been an active discussion on financial investment income tax among political issues. How do experts see this as a matter of interest as to whether the gold tax will be implemented or suspended in January next year?

[Son Seokwoo]
This week, the Democratic Party of Korea held a general meeting of its members to try to decide the party's position on this financial investment. However, in the end, the general meeting of the lawmakers failed to reach a conclusion. So I decided to delegate it to the leadership. As you know, the Democratic Party of Korea is actually at the key to implementing the financial investment tax in January next year, but it is the majority party.

However, even among lawmakers, there were heated debates over whether to keep the plan in place, suspend it, or abolish it altogether and create a new round, and opinions were so tight that they could not vote for or against it.

So we eventually made the decision to delegate it to the leadership, and there are reasons for each, whether it's implementation, deferment or abolition. This is a situation where the market continues to be uncertain, and in the end, the Democratic Party leadership has to come to a conclusion.

[Anchor]
However, the Korean stock market has a very low growth rate compared to the global stock market this year alone. On the contrary, there are many stocks that have fallen.

[Son Seokwoo]
The rate of increase is lower than in South American countries.

[Anchor]
But if you suspend or abolish the gold investment tax now, do you think it will have a positive impact on the stock market? What do you think?

[Son Seokwoo]
Determining the stock price is very complex. We also reflect economic fundamentals, but we cannot rush to judge whether this will go up or down with just the financial investment tax because the overall internal and external economic conditions at that time work in combination.

However, given this premise, it is clear that the uncertainty related to the financial investment tax has clearly been a negative factor for the stock price. For example, if the political circles make such hard-line remarks and the financial investment trend, the index immediately turns to the downside or increases the fall.

In terms of supply and demand, the overall stock trading volume has decreased a lot as uncertainty related to the gold investment tax has emerged as a major topic in our stock market. In particular, individual investors left our KOSPI and KOSDAQ and moved to the US and other countries' stock markets.

Looking at the overall flow of these things, it can be seen as the aftermath of uncertainty about the financial investment tax, and a number of surveys have recently been conducted on the general public and experts regarding the financial investment tax. The overall result was that many opinions against the introduction of the financial investment tax prevailed.

So, if the introduction of the financial investment tax is suspended or abolished, investors may be less worried about tax in the short term. In the short term, this sense of relief that policy uncertainty has disappeared is likely to serve as a boon.

[Anchor]
I see. Thank you very much. The base rate will be decided on the 11th of this week whether the Bank of Korea will make a decision for the first time in three years. In addition, the postponement, abolition, and retention of financial investment income tax are expected to be decided soon. Let's stop here. So far, we've been talking about it with Son Seok-woo, an economic critic. Thank you very much. Thank you.