South Korea central bank should consider housing costs in inflation index, says board member

SEOUL: One of six board members at South Korea's central bank said on Wednesday it was time to review the inflation index to include rising housing costs as the board considers further monetary policy tightening.

Suh Young-kyung, giving a speech at the Korea Chamber of Commerce and Industry in Seoul, said the current policy interest rate was still accommodative and that the board would "need to decide on the timing and pace of further interest rate hikes."

In the process, one of the factors the central bank should consider includes factoring in rising housing costs into the consumer price index.

"As home prices have been increasing since the COVID-19 outbreak, there are an increasing number of cases including the ECB, New Zealand, Norway, etc, where they explicitly consider housing prices when operating monetary policy," Suh said in her speech, a copy of which was made available to media.

"We, too, need an active discussion on this."

The Bank of Korea raised its policy rate by 25 basis points to 0.75% in August, the first hike in almost three years and the first major Asian central bank to shift away from pandemic-era monetary stimulus.

The move was aimed at curbing record-high household debt and surging property prices that have become a risk for the economy. Apartment prices in the capital region surrounding Seoul, home to about half of the country's population, jumped 13.11% this year through August.

Analysts expect the BOK to raise rates in the coming weeks or next year, with most seeing the base rate at 1.25% by end-2022.