South Korea Maintains Accommodative Monetary Policies Amid Low Inflation

The central bank of South Korea would maintain their accommodative monetary policies because of low inflation and rising household debt.  

Exports greatly contributed to the gross domestic product which is anticipated to increase, according to the central bank. Meanwhile, due to the debt burden, the private consumption will decline, which contributes 46 percent of the GDP in 2016.

Comments on Thursday substantiate the possibility of the central bank in sustaining longer interest rates

The household debt amounts to 1.419.1 trillion won or $1.31 trillion represents 190 percent of GDP, which prompts consumers to shell out less on foods and clothes that could hamper economic growth.

Higher exports and more investments would boost growth this year with the global demand for memory South Korean and petrochemical products will most likely stay strong.

Annual inflation of the country slid down to 1.0 percent in January, which has been the slowest in 1 year and 5 months.

On a bright side, there is a potential growth for the economy according to the central bank based on the quarterly monetary policy report. The consumption may be recovering slower than before, primarily because of more debt payments.