March 20, 2019 / 6:02 AM / 3 months ago

S. Korea's cenbank needs to be wary of policy easing - board member

SEOUL, March 20 (Reuters) - South Korea’s central bank needs to be mindful of the side effects of an early easing in policy rates, a bank board member said on Wednesday, adding to views that the bank’s seven-member board is likely to keep settings unchanged this year.

“If an accommodative monetary policy introduced to boost short-term inflationary pressure ends up causing excessive financial imbalances, it could bring low growth, worsen indebtedness,” and bring other negative consequences to the economy, Bank of Korea board member Lee Il-houng told reporters at a news conference in Seoul.

Although the bank raised its policy interest rate twice since the end of 2017, South Korea’s household debt still poses risks to its financial stability as demand for mortgages remain strong, Lee added.

The BOK kept the seven-day repurchase rate at 1.75 percent in February, in line with forecasts from 11 analysts surveyed in a Reuters poll.

A majority of analysts see the central bank staying on hold throughout this year, as weakness in exports and the jobs market keep policymakers cautious.

Markets view board member Lee as one of the more hawkish policymakers in the seven-member committee, given his frequent dissent against the board majority in votes where the bank has kept rates steady.

In October 2018, Lee was one of two board members who voted to raise rates, against the bank’s decision to hold.

Reporting by Cynthia Kim; Editing by Sam Holmes

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