Households need to adjust to higher interest rates: BOK chief

Published : Dec 1, 2017 - 11:08 Updated : Dec 1, 2017 - 11:08

South Korea's central bank chief Friday said local households need to adjust themselves to higher interest trends, following the first rate hike in more than six years.

The Bank of Korea raised the base rate by a quarter percentage point to 1.5 percent Thursday for the first time since June 2011, citing clear signs of economic recovery and low inflation pressure.

Mounting household debt, which surpassed 1,400 trillion won ($1.29 trillion) in September, was also a big mover.

"Maintaining low rate trends will deepen the financial market imbalance, such as massive household credit," BOK Gov. Lee Ju-yeol said in a meeting. He pointed out that despite a rate increase, the financial market still remains soft.

Bank of Korea Gov. Lee Ju-yeol speaks at a financial meeting in Seoul on Dec. 1, 2017. (Yonhap)

The governor said the BOK's decision has had little impact on the financial market so far, as investors have already priced in the move in advance.

"The central bank has kept giving signs of monetary tightening to prepare market players for higher borrowing costs," Lee said. "It is time for each household to make different decisions on money lending, saving and investment." (Yonhap)