The Bank of Korea is poised to lower the benchmark interest rate further after President Park Geun-hye in a New Year’s address made her wishes clear. If it does, the key interest rate could enter an unprecedented 1 percent range. This may be an inevitable move, considering deepening troubles in the domestic economy, worsening corporate profitability and a worsening employment situation amid a prolonged slowdown in domestic demand. Ultra-low interest rates are necessary to buy time for structural reforms to kick in. But there is an uncomfortable downside risk to the move - its effect on household debt.
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