“The President of the Bank of Korea, Seung Park Hinted Raising Interest Rate”

The Bank of Korea warns the possibility of economy overheating.

The President of the Bank of Korea, Seung Park says in his commemorative address for its 52 anniversary on 12th, “this years rate of economic growth is predicted up to 6 – 7% and it will dramatically surpass the potential growth rate (5.0 – 5.5%),” and emphasizes, “The later economic recovery should be promoted upon the strong stability.”

He says, “According to the past experience, there might be a concern of ill effects such as a pressure in price rise and a bubble in an asset price, and an aggravation of current account balance if the economy expands too fast.”

He also says, “Because of the recent depression, there still is a reserve in supply ability; however, there will be a pressure in price rise due to the excess demand caused by the recovery of export and facility investment” and he declared, “To prepare a prior interest rate policy against the pressure of inflation.” The money market predicts the call interest rate will be increased by 0.25 – 0.5% in the third quarter.

President Park says, “Banks should expand the long-term receiving foundation and control the increase of household loan preparing the long-term demand of funds” and “will partially adjust the reserves and the total amount limit loan system.”

The Bank of Korea considers reducing the limit of the total amount limit loan or raising the reserve requirement ratio(5%) of demand deposit instead of lowering that(2%) of the savings deposit.

Sang-Chul Kim sckim007@donga.com