The Bank of Korea governor Lee Joo-yeol said today (16th) that the current base rate is close to the effective lower limit (the lowest rate that can be realistically lowered). If the economic slowdown intensifies, you will have to use other methods such as open market operation and purchase of government bonds.

Governor Lee said today that he had an Internet live broadcast press conference right after the meeting of the Financial Currency Committee.

“The recent domestic financial market is quite stable, but the real economy continues to be sluggish and uncertainty is high,” Lee said. “It is necessary to judge whether or not to implement non-traditional policies including quantitative easing in the future.”

The following is an answer to this governor's question.

Q. Is the likelihood of responding to non-traditional currencies such as'quantitative easing in Korea' reduced?

▲ Considering that the domestic financial market was unstable at the beginning of March at the end of February when Corona 19 began to spread in Korea, the financial market has been quite stable recently.

However, the real economy is still sluggish and the prospects are very uncertain.

At this time, it is considered necessary to be aware of the easing monetary policy, and it is necessary to judge whether or not to implement non-traditional policies, including quantitative easing, by examining the ripple effects of the current policies and the development of financial and economic conditions in the future.

Q. There is a voice that the real estate market has overheated due to the increase in liquidity due to the cut in the interest rate. To what extent were interest rates frozen?

▲ In response to Corona 19, the currency is forced to operate loosely.

In this situation, it is desirable to respond to real estate market instability by means of the government's macroprudential policy and supply and demand measures.

The most important thing is to create a productive investment so that the latter liquidity can flow to the more productive part of the asset market.

The government is working with the same awareness. We do not think that the interest rate freeze was decided by reflecting the housing market situation, but that it is appropriate to take the current key in view of current growth, price trends, and outlook.

Q. What is the reason for the downward revision of Korea's economic growth rate? Thinking of the'worst scenario' (worst prospect)?

▲ 3 weeks ago, I said at the inflation session,'I do not deviate greatly from the scenario I assumed when I forecast in May.'

First of all, the decline in exports was much larger than expected. This results in lowering the forecast for 2Q growth.

I assumed that the spread of Corona 19 will calm down in June and will be more subdued in the second half of the year, but after two weeks in July, the spread has accelerated.

Exports to Korea, which are closely related to the global economy, may be delayed after 2Q.

It is no exaggeration to say that the direction of the world economy as well as Korea depends on Corona19.

The worst was expected at -1.8%, but at the moment, I also expect that it won't go until the worst.


Q. How do you evaluate the recent rise in housing prices and the effectiveness of policies?

▲ The government's two measures last month and this month showed that the willingness to stabilize the housing market was quite strong.

In particular, I think it will definitely be effective in curbing speculation demand for multi-homeowners.

As such, I believe the possibility of further increase in housing prices in the future will be quite limited.

Q. If the low interest rate continues, the possibility of a conflict that the inflation rate cannot reach the target increases. Which goals do you focus more on?

▲ Although it has multiple targets of price stability and interest rate stability targets, the uncertainty of the current domestic economic trend is very high.

Going forward, monetary policy needs to remain relaxed until the domestic economy recovers from Corona 19 and the economy seems to recover.

However, even when the real economy is in such a difficult situation, we will take a careful look at the fact that the housing price is rising unexpectedly and household debt is also increasing.

Q. Do you expect the government bond interest rate to rise in the third round? How much are you planning to buy?

▲ Even after the third supplementary announcement, the market interest rate has remained stable.

The level of long-term interest rates has largely affected the additional impact, and demand for long-term investment institutions or foreign investment is solid.

We do not expect interest rate volatility to increase significantly in the future. When interest rates rise sharply or when there is a market uncertainty, we will take measures to stabilize the market without delay.

Q. Is there any opinion that it is necessary to purchase regular bonds of Han Eun due to the increase in the issuance of government bonds following the'Korean New Deal?'

▲ As the method of financing has not been determined in detail, it is difficult to tell the effect.

I know that the current market is concerned that supply and demand imbalance will occur and long-term interest rates will rise if government bonds continue to be issued and key industry stabilization funds are also issued.

We are cautious of the possibility of such market instability, and if it does, we are actively considering market stabilization measures, including expanding the purchase of government bonds.

Q. Is there a view that the reaction from the government officials such as Hong Nam-ki, Deputy Prime Minister Hong Nam-ki interferes with monetary policy?

▲ Looking back and forth from the vice-president's remarks, it was made clear that'it is not appropriate to speak because the financial issue is a unique authority.

It was also spoken of with the emphasis on inducing rich commercial liquidity into the productive part. There was no mention of the interest rate policy situation.

Q. If the situation doesn't get any better, are there any policy measures that can be introduced other than interest rates?

▲ I think the current standard interest rate is close to the effective level.

If the economic slowdown is intensifying and needs to be further eased, we will respond appropriately by using policy measures such as loans and open market operations in addition to interest rates. The purchase of government bonds is another policy measure other than interest rates.

Q. The government expects to execute the 3rd supplementary budget (additional). What is the effect of the growth rate growth this year?

▲ I think there will be 0.1~0.2% point effect.  

(Photo = Yonhap News)