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The Bank of Korea raised the key interest rate by 0.25%. The benchmark interest rate, which had been lowered to the lowest level ever recorded due to the corona virus last year, has been raised to 0.75% in one year and three months. Although the corona virus is still weighing on our economy, the government judges that the timing of the increase cannot be delayed any longer because household debt is increasing, and the market has been releasing so much money that it is necessary to pay attention to inflation. This is not the end, and the prospect that interest rates may rise further within this year has increased the burden on borrowers from banks.



By Kim Jung-woo, staff reporter.



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Although private consumption is stagnating due to the 4th pandemic of COVID-19, the Bank of Korea evaluated that the Korean economy is showing a solid recovery in terms of exports, facility investment, and employment.



On the other hand, it was judged that it would be difficult to maintain ultra-low interest rates any longer due to the fact that household debt exceeded KRW 1,800 trillion for the first time in history, the upward trend in asset prices such as house prices has not stopped, and inflationary pressure has also increased.



[Ha Jun-kyung / Professor of Economics, Hanyang University: If we do not post this time, another wrong signal may be sent to the market. Because the household loan or real estate market is overheating to a level that is not well controlled.]



The interest burden on borrowers immediately increases.



If the loan interest rate rises as much as the base rate hike, the interest burden on floating rate borrowers will increase by 3 trillion won.



Financial difficulties and interest burdens are inevitable for the underprivileged, such as small business owners and the self-employed, who are already in a difficult situation.



The problem is that it is highly likely that interest rate hikes within the year will not stop all at once.



[Lee Joo-yeol / Governor of the Bank of Korea: We have now taken the first step because of the need to alleviate the accumulation of financial imbalances. What I can tell you at this point is that I will not rush, but I will not delay.] Although the



rate of increase in household debt and house price growth is expected to slow due to the interest rate hike, there are many forecasts that it is difficult to expect an immediate effect from a small 0.25 percentage point increase. .



[Park Won-gap / KB Kookmin Bank Real Estate Expert: Because interest rates are still lower than before the pandemic. Rather than a direct drop in house prices, I am seeing a slowdown in transaction volume or price growth.] The



rest of this year's MPC schedule will depend on October and November, the 4th pandemic situation, vaccination rate, and the US Federal Reserve's interest rate policy. A further increase is expected to be decided.



(Video editing: Kim Ho-jin)