[THE INVESTOR] The Bank of Korea on Thursday kept its record low base rate unchanged at 1.25 percent for two straight months, citing the weak global economy and the importance of implementing fiscal measures for the economy.

BOK Gov. Lee Ju-yeol said the committee members reached a unanimous decision to freeze the rate, reiterating the current monetary policy was already accommodating enough for the government’s fiscal stimulus.

The central bank is not at the moment considering further lowering its key rate to near zero, as have other advanced economies, noting it was more important for Korea’s fiscal measures to tackle corporate restructuring and structural reform at home.

“I believe Korea is not in the position to consider a near-zero rate or (unorthodox) monetary easing policy like that of advanced economies,” BOK Gov. Lee told reporters after the rate decision.

Also, Lee raised concerns over the fast growth of household borrowings on low interest rates, not only from banks, but also from nonbanks, despite regulatory measures to curb rising household debt.

“It is a fact that household borrowings from nonbanks have increased this year. ... Since a continued increase in household debt is seen not as appropriate, we believe we need to consider further measures if necessary,” the top monetary policymaker said.

“Along with household debt, we will closely monitor and assess changes in major economies’ monetary policies, and (the government’s) restructuring process,” he added.

The central bank said the market should not be too concerned with the sudden appreciation of the Korean won against the U.S. dollar, explaining a stronger currency is natural following a sovereign credit upgrade and revived investor confidence.

Korea’s foreign exchange market recently saw its won-dollar rate fall below 1,100 won. S&P Global Ratings raised its long-term sovereign credit rating on Korea to “AA” from “AA-.” It also affirmed its short-term rating on Korea at “A-1+.”

“With concerns easing in the global financial markets and investor sentiment improving, an inflow of foreign capital contributed (to the won’s gain),” Lee said.

“I do not think that a sudden inflow of (currency) speculative funds caused it. Nevertheless, we will look into it if there was,” he added.

The Bank of Korea last month revised down its growth forecast from 2.8 percent to 2.7 percent this year, as well as its outlook for consumer prices increasing to 1.1 percent from 1.2 percent.

By Park Hyong-ki/The Korea Herald (hkp@heraldcorp.com)