June 11, 2020 / 11:02 PM / a month ago

REFILE-S.Korea c.bank chief vows to keep policy loose until economy heals

(Corrects to remove extraneous word from headline)

SEOUL, June 12 (Reuters) - South Korea’s central bank chief said on Friday it will keep pumping stimulus into the trade-reliant economy until some strong signs of recovery are on the horizon.

“There is a need to keep monetary policy accommodative until we can project that the economy would heal from the coronavirus crisis,” Bank of Korea (BOK) Governor Lee Ju-yeol said, according to an advance written copy of a speech prepared for the bank’s 70th anniversary.

Lee also said the BOK would deploy policy tools other than interest rates if needed to make sure credit flows through the economy, without elaborating further.

In May, the BOK trimmed its forecast for economic growth this year to -0.2%, from its earlier projection of 2.1% growth, and cut interest rates to 0.50%, the lowest since the bank adopted the current system in 1999.

Lee’s vow to keep pushing stimulus into the economy came with a warning, however.

“In the mid- to long-term horizon, we should be on guard about the possibility of accumulating financial imbalances,” he said.

“We have repeatedly seen cumulative increases in financial imbalances, such as excessive expansion of credit or asset price bubbles, leading to crisis,” Lee said, adding the bank should plan to “normalize exceptional steps” taken to fight the fallout from the pandemic.

The bank’s already easy money policy has been blamed for propelling household debt to all-time highs in Asia’s fourth largest economy. The median price for an apartment in smart parts of Seoul has surged by 50% since President Moon Jae-in took office in 2017, according to data from KB Bank.

As of Thursday, the total number of coronavirus infections was 11,947 in South Korea, with 276 deaths, according to government data. (Reporting by Cynthia Kim; Editing by Alex Richardson)

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