BOK chief: Fiscal policy more important than monetary policy amid low growth

The head of South Korea's central bank on Wednesday stressed the importance of a fiscal and restructuring policy than a monetary one in tackling the country's low growth.

Bank of Korea Governor Lee Ju-yeol said in a meeting with lawmakers that South Korea's relatively strong financial status will allow the government to inject some money to support slowing growth and generate jobs.

He said an excessive monetary easing policy could lead to an increase of risky assets of financial companies and an expansion of household and corporate debts.

The country's overall household debt reached a record high of 1,223.7 trillion won ($1,072 billion) as of end-March, breaching the 1,200-trillion-won mark for the first time in its history.

Lee also cited the concerns of his counterparts in other countries that a monetary policy can only buy time and could cause another crisis, adding South Korea could not cut its interest rate to zero.

His comments are widely seen as a caution against a monetary policy, including interest rate cuts.

The central bank kept the key rate steady at 1.25 percent earlier this month.

Lee also called for improved productivity to boost the country's potential growth.

Earlier this month, the central bank revised down its 2016 growth outlook for Asia's fourth-largest economy to 2.7 percent from 2.8 percent three months earlier, citing sluggish consumption at home and abroad. (Yonhap)