An official inspects 50,000 received banknotes at Hana Financial institution’s counterfeit response heart in Seoul, on this file picture taken July 17, 2024. Yonhap
Elevated liquidity will not be the only issue behind the current surge in housing costs within the Seoul metropolitan space or the weak spot of the native forex, the Financial institution of Korea (BOK) stated Tuesday, stressing that financial coverage alone will not be enough to completely management a rise in loans.
In a weblog publish, the central financial institution rejected claims that current “extreme” liquidity has fueled rising house costs and weakened the Korean received in opposition to the U.S. greenback.
“There are numerous elements affecting housing costs and the trade price, and it’s unreasonable to attribute them solely to a rise in liquidity,” the BOK stated. “Though M2 has risen in current months, the rise will not be uncommon.”
The central financial institution famous that the rise in liquidity stemmed from 4 coverage price cuts in the course of the present easing cycle that started final 12 months, which have affected personal credit score with a time lag, in addition to a current growth within the present account surplus. Greater authorities bond issuance pushed by elevated fiscal spending was additionally cited as a contributing issue.
“In contrast with previous easing cycles, nonetheless, the cumulative development price of M2 in the course of the present rate-cutting interval stands at 8.7 %, greater than in 2012, however decrease than in 2014 and 2019,” the publish stated.
The BOK added that the current weakening of the received was largely pushed by supply-demand elements, together with elevated abroad funding and exporters’ holding of international forex earnings.
It attributed rising housing costs in Seoul and close by areas primarily to produce scarcity issues, expectations of value positive factors in particular districts and a robust choice for proudly owning a single, strong house, fairly than a number of properties.
“It’s tough to completely management home liquidity by way of financial coverage alone. Coverage efforts are wanted to bolster investor confidence and be certain that liquidity flows into extra productive sectors,” the BOK stated.
