Bank of Korea Gov. Rhee Chang-yong speaks during the National Assembly Strategy and Finance Committee's audit of the central bank at BOK headquarters in Seoul, Monday. Yonhap

A reduction in the key rate is not a "silver bullet" to Korea's stagnant economy, the country's top monetary policymaker said Monday, in an effort to dispel criticism of the central bank's later-than-expected dovish pivot this month.

A July rate cut was in the picture, according to Bank of Korea (BOK) Gov. Rhee Chang-yong, as warranted by a sustained downtrend in the country's headline inflation and sluggish economy.

However, containment of sudden rapid growth in household debt overlapped with surging home prices emerged as a greater priority, necessitating the balance in stability between price and financial conditions. Also at play was the lingering, more imminent risk of project financing, coupled with Korea's plunging currency against the dollar.

"Monetary easing is not a silver bullet," Rhee said during the National Assembly Strategy and Finance Committee's audit of the BOK.

He added that the key rate does have a role in the overall trajectory of the economy, but the extent of policy efficacy must be considered in the context of a variety of lingering structural factors.

"We have published a number of research papers to delve deeply into the decades-long issues of great social divisiveness and disparities," he said. "I would refer the committee members to those for further reference."

Rhee said early monetary easing, long embraced by the Korea Development Institute (KDI), a state-run think tank, lacked consideration for the long-term financial stability of the country.

The think tank since May called for a swift rate cut to help boost domestic consumption including corporate investments and retail spending. It said the economy was losing vigor, crippled by the central bank's higher-for-longer stance. The BOK lowered its key rate to 3.25 percent, Friday, down from the previous 3.5 percent held steady for 21 months.

"We are aware of the implication of our extended monetary policy, especially on the lives of the low-income and self-employed," he said. "But multiple months of tightening was the right step to timely temper inflation — however painful it may have been."

The KDI underscored an immediate economic recovery, a policy priority Rhee said could hurt financial stability.

"The state think tank said we were behind the curve, calling for easing with the sole emphasis on economic stagnation excluding other financial stability considerations," Rhee said. "However, we had to take a different, broader approach to encompass the rapid debt buildup of households and small businesses, long left unaddressed and unresolved."

Had the rate cut proceeded without the structural reform measures in place, years of distressed debt growth would have only surged further, he added.

"We are steering the course of monetary policy at an appropriate pace with fiscal and other government policies factored in," he said. "The future policy path will be determined by incoming data and economic and financial market conditions."

Rhee said he would not run for elected office.