|Bank of Korea (BOK) Deputy Governor Yoon Myun-shik speaks during a media conference at the BOK head office in central Seoul, Friday. / Yohhap|
By Jhoo Dong-chan
The Bank of Korea (BOK) Friday dismissed growing pressure from the government and ruling Democratic Party of Korea (DPK) to hike key interest rates to curb soaring housing prices in Seoul and Gyeonggi Province.
The Moon Jae-in administration and DPK lawmakers have claimed the BOK should make it more expensive to borrow money in order to discourage people from purchasing apartments. But the central bank said its monetary policies are not a tool to "control" the real market, stressing it will make policy decisions independently.
"The BOK considers various factors when raising or decreasing the policy rate. Our monetary policy doesn't aim solely at apartment prices," Bank of Korea Deputy Governor Yoon Myun-shik said during a media conference, Friday.
"Seoul's surging housing prices are attributed to the imbalance between supply and demand as well as property speculation in certain areas."
On Thursday, the government announced a set of policies to levy heavier taxes and impose stricter loan restrictions against owners of multiple homes and high-value homes in a bid to curb Seoul's soaring housing prices.
"We believe the government's Sept. 13 measure will cool down Seoul's real estate market. Housing prices are a very important macroeconomyfactor, but once again, the key rate should be adjusted based on various factors such as inflation and economic growth rate," Yoon said.
"The BOK believes the nation's current economy is still on track satisfying the potential growth rate. However, there is a gap in the inflation rate from the outlook. We will take such factors into account as well when determining the rate."
DPK lawmakers have claimed the BOK should immediately raise the policy rate to squeeze the nation's idle funds estimated at over 1,000 trillion won ($889 billion), and Rep. Choi Woon-yeol of the DPK was the first one who opened fire against the BOK.
"The key rate gap with the U.S. will reach 0.75 percent next month. Korea will have no choice but to raise the rate if the Federal Reserve takes the initiative," he said. The gap is currently 0.5 percent.
"The BOK has to pre-emptively raise the interest rate before the country sees any massive capital outflow."
Prime Minister Lee Nak-yon agreed.
"If we do not raise the interest rate now, we will see a massive capital departure," Lee said during the National Assembly hearing session Sept. 13.
"The U.S. rate has already risen above Korea's rate. We will see various problems if we don't raise it immediately."
Market observers are, however, skeptical of the government and ruling party's claim, saying they are just passing the buck to the BOK.
"The problem comes from an imbalance between supply and demand in the metropolitan area. The interest rate is nothing to do with the soaring home prices," said a commercial bank loan department worker who demanded not to be named.
"Even a university student made an inquiry about possible credit line to jump onto the bubble few days ago. I don't think the additional policy will cool down the current speculation fever anytime soon."