[비즈한국] As the Bank of Korea (BOK) prepares to hold its Monetary Policy Committee meeting on the 11th to decide on the base interest rate, the market is watching the results closely. Currently, expectations are leaning toward the BOK opting for a rate cut this time. Last month’s consumer price inflation rate was 1.6%, the lowest in 3 years and 7 months since February 2021, when it recorded 1.4%. Core inflation, excluding food and energy, also fell to 2.0%. This means the 2% inflation target, which the BOK has consistently emphasized, has been achieved.
Kang Seung-won, a researcher at NH Investment & Securities, stated, “Given the sharp rise in international oil prices and agricultural and fisheries prices last October, the base effect this October will be even greater than in September,” adding, “There is a possibility that the inflation rate in October could fall below 1.6%.” The analysis suggests that the justification for delaying the rate cut until November has effectively disappeared.
The sluggish domestic demand caused by prolonged high interest rates is also bolstering the outlook for a rate cut. Ahn Jae-kyun, a researcher at Shinhan Securities, observed, “The growth trend in total card approval performance and approvals for the eight major sectors closely related to consumer life has been slowing since the second half of last year,” adding, “If a rate cut is needed to boost domestic demand, it would be more effective to do it in October rather than waiting until November.”
However, household debt and real estate issues appear to be keeping the BOK in deep deliberation until the very end. According to the financial sector, the household loan balance of the five major banks—KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup—totaled 730.9671 trillion won last month, an increase of 5.6029 trillion won from the end of August. The mortgage loan balance stood at 574.5764 trillion won, up 5.9148 trillion won from the previous month, while the credit loan balance was 103.4571 trillion won, an increase of 900 million won compared to the previous month. The growth in mortgages slowed compared to the previous month, and credit loans remained at a level similar to the previous quarter.
Jung Kwang-myung, a researcher at DB Financial Investment, diagnosed, “Considering that there were fewer business days due to the Chuseok holiday in September and that the second stage of the stress Debt Service Ratio (DSR) regulations had been implemented, the scale of household loan growth was significant.” He added, “It seems that the time lag between mortgage application and actual execution had an effect; mortgages applied for in August influenced the increase in loan balances in September.” Researcher Jung also predicted, “Considering that banks are managing household loan growth, such as through raising mortgage spread rates, a slowdown in household loan growth will likely appear in October as well.”
According to KB Real Estate’s weekly apartment market trend data, as of the 30th of last month, national apartment sale prices rose by 0.02%, and prices in the Seoul metropolitan area rose by 0.05% compared to the previous week. Notably, house prices in Seoul rose by 0.09%, with the growth rate falling below 0.1% for the first time in 12 weeks since early July. The intent to purchase apartments in Seoul also continued to show a downward trend. Researcher Kang Seung-won noted, “Last month, the BOK Deputy Governor made remarks to the effect that they ‘would not wait for the household debt issue to be completely resolved,’ and it is encouraging that the ‘clue’ regarding the effect of government policies, which the Deputy Governor suggested as a criterion for policy implementation, has been confirmed.”
Gong Dong-rak, a researcher at Daishin Securities, also said, “Regarding household debt and financial stability issues, which the monetary authorities had identified as factors directly burdening interest rate cuts, the direction has now been set toward micro-responses like loan regulations, which will support the initiation of a base rate cut.”
As the outlook for a rate cut becomes more dominant, some suggest that rather than the rate cut itself impacting the market, future market variables will be Samsung Electronics005930 earnings or the Middle East crisis involving Israel and Iran. Heo Jae-hwan, a researcher at Eugene Investment & Securities, analyzed, “The crisis in the Middle East is a very significant variable for next year's economy and financial markets,” and added, “Oil price instability due to the Middle East crisis could undermine expectations for a soft landing in the U.S.” Researcher Heo also advised, “If Trump is elected in the U.S. presidential election, this issue is highly likely to become more complex. While it is not to the extent of reducing stock holdings entirely due to rising tensions in the Middle East, it is necessary to diversify risks in the short term.”