SEOUL (Reuters) - South Korea’s acting president Hwang Kyo-ahn on Wednesday urged policy consistency in managing the country’s high household debt burden, saying that low-income households and entrepreneurs are most at risk to any increases in borrowing costs.
“For household debt to have a soft landing, it’s important to give consistent policy signals rather than continue prescribing treatment that varies per situation,” said Hwang in opening remarks at a meeting with government and other officials on household debt.
Hwang said greater policy attention is needed to manage debt of low-income households and entrepreneurs who could be at risk should market interest rates rise.
While South Korea’s benchmark policy rate is currently at a record low of 1.25 percent, some analysts see the Bank of Korea raising rates as soon as early next year to temper capital outflows as the U.S. Federal Reserve raises rates.
South Korea’s household credit grew at its fastest pace in over a decade in the fourth quarter of 2016 as borrowers continued to take advantage of the ultra-low interest rates.
Policymakers and analysts say South Korea’s household debt isn’t likely to trigger a financial crisis, though there are concerns the situation could turn perilous should interest rates start rising rapidly.
Reporting by Christine Kim; Editing by Shri Navaratnam