"Danger down the economy"...Bank of Korea's Unusual Report [Y Record]

■ Host: Anchor Jeong Jin-hyung and Anchor Cho Ye-jin
■ Starring: Professor Lee Jung-hwan, Hanyang University School of Economics and Finance

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

◇Anchor> Let's talk about the Bank of Korea. In the report, it was revealed that the government will make an additional cut in the benchmark interest rate next year. I think there's a background to this decision.

◆Lee Jung-hwan> Yesterday, there was a report on the direction of monetary credit policy management in 2025. You can understand that it contains basic information on how to manage actual monetary policy and household debt of credit companies next year. Let's say the dovish tone here. He said he made a lot of implications for a rate cut. So, the Bank of Korea seems to have decided on a combination of three. First of all, it is pointed out that the uncertainty is very large, and secondly, there was an opinion that the competitiveness of Korea's industry seems to continue to be difficult due to international competition. Third, I also pointed out the usual problem. Since trade could suffer damage and how uncertainties will proceed next year, why not actively implement monetary policy according to such downward pressure on the economy? Being active is an expression of the intention to lower interest rates because interest rates are not low. In the end, the Bank of Korea continues to say that prices will stabilize at around 2% next year. It believes that the target level of the so-called policy will stabilize, so if prices are stabilized, monetary policy can be relaxed to support the Korean economy, and in particular, the difficulties of small business owners and ordinary people have continued recently. The construction industry has also been negative for several years by signaling negative growth. The domestic market can increase only when the construction industry or the small business economy picks up, but the negative cycle continues as domestic demand continues to contract, and there are concerns that these negative cycles of shrinking domestic demand, shrinking employment, shrinking investment, and shrinking employment will continue.

◇Anchor> Then, when do you expect the rate cut to be?

◆Lee Jung-hwan> The months when the Monetary Policy Committee is held are held except in March, June, September, and December. Then it will be January or February, but I didn't expect it because the Monetary Policy Committee said it would cut interest rates last November, but I cut interest rates once. After all, with this report, the market can cut it in January. It aims to actively supply liquidity from the Bank of Korea, especially in the face of political uncertainty.
That means that there is so much uncertainty that you expressed your opinion that by actively supplying liquidity to stabilize the financial market, financial institutions will not have problems with lending or capital supply. There were many opinions that such stories would be taken off in January because they were told twice last year. Because I think it was unusual to get off in November, and there were many opinions that it would not get off in January. As the direction of monetary credit policy was revealed yesterday, the timing was accelerated. Of course, there are concerns about the foreign exchange market, which hit KRW 1460 today, but since financial institutions, commerce, manufacturing, and all economies are increasingly anxious about the growing uncertainty and are asking to resolve this uncertainty, they can take more active monetary policy. So, I think there are a lot of opinions that there is a possibility of lowering it in January.

◇ Anchor> It seems to be a decision that puts more weight on domestic demand than on exchange rates, right?

◆Lee Jung-hwan> The U.S. is going to lower its benchmark interest rate next year, but it is predicting that it will not be as expected. During the FOMC meeting, the U.S. is slow to ease monetary policy because it changed the dot plot on the benchmark interest rate and changed from four cuts to two next year. Nevertheless, it means that we will speed up the pace of monetary easing. I can tell you that the gap in the benchmark interest rate could widen a little more than expected. So the demand for the U.S. dollar... Because the US interest rate is higher than expected, there is demand for the US dollar and demand for the won is inevitably weak, so there are many negative factors in terms of exchange rates. Nevertheless, I think I can tell you that the monetary easing policy has changed due to severe concerns about the domestic economy.

Excerpted from
: Lee Sun Digital News Team Editor

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