In 3 months again, 'Big Step'… Concerns about the real recession ↑

The Bank of Korea has made twice the first Big Step, which raises the base rate by 0.50%p (50bp) to reduce the price stabilization and internal and external interest rates. With this decision, Korea's base rate is 3.0%annually, reaching 3%in 10 years and one month since September 2012. In the midst of the US Federal Reserve Tributaries, Korea is also expected to continue its currency tightening, and the evaluation of experts on interest rate hikes is mixed.

First 'Double Big Step'… 175bp interest rates in 10 months

On the 12th, the Financial Monetary Commission, held in Jungle, Seoul, decided to raise the base rate by 0.50%p compared to the previous 1. After three months of his first Big Step on the Summon Committee in July, he stepped on the Big Step again. The interest rate hike, which was 1.25%in January this year, rose to 3.00%annually, raising 175bp in 10 months.

On the day, Lee Changing said, As the US Fed's interest rate is significantly increased, and the prices continue to rise, the rate of inflation rate is increasing due to the increase in exchange rates, which increases the intensity of policy response. I explained the reason for the step.

In September, consumer prices fell 0.1%p from the previous month (5.7%) to 5.6%, but increased 0.3%year-on-year. The root inflation rate is 4.1%and the expected inflation rate is 4.2%. Lee said, In the future, consumer prices will continue to rise as high as 5-6%for a long time, as the influence of the exchange rate rising in the future.

He said, The domestic economy is slowing, but it is necessary to continue the interest rate hike because it is expected to continue to rise high over the target level. The Fed will check the changes in external conditions, such as the FOMC meeting and energy movement in November, to determine the increase and the route afterwards.

However, Big Step insisted that Shin Sung-hwan and JU Singsong insisted on a 25bp increase.

Need to raise the foreign exchange and capital market... 75bp should be raised

The market has predicted this Big Step. This is because the US Fed has grown three times from June to September, with the Fed's Fed, which raises the base rate by 0.75%p, and the internal and external interest rate gap has been up to 0.75%p. This year, the Fed's Fed's Public Market Committee (FOMC) has been twice, and if you decide on a giant step, the interest rate difference with Korea can be greater.

SEO Yong, a professor of business administration at Samsung University, said, It is expected that the consumer inflation rate is high, and the US has made a 75bp increase. The interest rate gap is more than 1%p. Professor Such said, If you look at trade and capital, there is no strong won of won, and the negative relationship between 10 years of Treasury bonds and KO SPI index will be negative. I see it.

Yang Jerónimo, a professor of economics at Onset University, said, We need a 75bp increase in order to stabilize the exchange rate and stabilize the capital market.

Recession

I am concerned about the rate of aggressive increase in interest rates

Nevertheless, there is a warning that aggressive interest rates can encourage the recession. Kim Youngkin, a professor at So gang University, said, The prices will be lowered and exports are expected to turn to negative in October. did.

Professor Kim said, If you raise interest rates, it affects consumption and investment for about six months, he said. In particular, he pointed out that capital could be leaked by interest rate cars between the United States and Korea. It's not a matter of capital leakage.

In addition, some have raised the burden of loan debt due to interest rates and reduced disposable income and reduced consumption. An official of the bank industry said, As the rate hike is steep, the shock of the financial market will be great.


According to data released by the Bank of Korea in March 2020, which was actually zero interest rates, loan interest rates were 2.91%per year, but the loan rate in August this year was 4.52%, up 1.61%p.

For this reason, the voice of the opposition to suppressing inflation rate by interest rate alone is also involved. In this regard, Professor Yong SEO said, In relation to household debt, we must give a policy alternative that can respond to the Financial Services Commission and the Ministry of Strategy and Finance.

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