{"id":2208755,"date":"2025-03-18T08:00:43","date_gmt":"2025-03-17T23:00:43","guid":{"rendered":"https:\/\/koreapro.org\/?p=2208755"},"modified":"2025-03-17T14:20:21","modified_gmt":"2025-03-17T05:20:21","slug":"south-koreas-rising-liquidity-and-debt-fuel-inflation-and-housing-concerns","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2025\/03\/south-koreas-rising-liquidity-and-debt-fuel-inflation-and-housing-concerns\/","title":{"rendered":"South Korea\u2019s rising liquidity and debt fuel inflation and housing concerns"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">The Bank of Korea (BOK) <\/span><a href=\"https:\/\/www.bok.or.kr\/portal\/bbs\/B0000501\/view.do?nttId=10090311&amp;searchCnd=1&amp;searchKwd=&amp;depth2=200038&amp;depth3=201263&amp;depth=201263&amp;pageUnit=10&amp;pageIndex=1&amp;programType=newsData&amp;menuNo=201264&amp;oldMenuNo=201263\"><span style=\"font-weight: 400;\">reported<\/span><\/a><span style=\"font-weight: 400;\"> on Monday that overall money supply increased by 0.5% month-on-month and 7.5% year-on-year in January, signaling rising liquidity in the financial system. Cash and demand deposits also increased by 0.6% month-on-month and 5.9% year-on-year. Financial institutions\u2019 liquidity rose by 0.4% from the previous month, while broad liquidity increased by 0.8%. Corporate liquidity holdings rose by $14.7 billion (21.2 trillion won), while household and nonprofit holdings increased by $2.7 billion (3.9 trillion won). The BOK highlighted that the liquidity increase reflects lower loan interest rates and increased capital availability.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The Financial Services Commission (FSC) <\/span><a href=\"https:\/\/www.fsc.go.kr\/no010101\/84165?srchCtgry=&amp;curPage=&amp;srchKey=&amp;srchText=&amp;srchBeginDt=&amp;srchEndDt=\"><span style=\"font-weight: 400;\">reported<\/span><\/a><span style=\"font-weight: 400;\"> on the same day that household loans increased by about $3 billion (4.3 trillion won) in February, reversing a decline of $622 million (900 billion won) in January. The rise was attributed to lower loan interest rates and increased housing demand driven by the start of the school term and a more active real estate market. The increase was particularly noticeable in Seoul, where easing of real estate regulations has fueled expectations of higher property prices. Banks reported that loan activity slowed in early March but remains elevated compared to last year.<\/span><\/p>\n<p><b>WHY IT MATTERS<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Rising liquidity may support short-term growth but could also increase inflationary pressure. The BOK cut its benchmark rate to <\/span><a href=\"https:\/\/koreapro.org\/2025\/02\/south-korea-faces-tense-monetary-future-amid-an-escalating-global-currency-war\/\"><span style=\"font-weight: 400;\">2.75%<\/span><\/a><span style=\"font-weight: 400;\"> in February, which has encouraged financial institutions to shift toward higher-yielding assets while making borrowing more attractive for households. However, if liquidity growth continues alongside rising household debt, the BOK may face pressure to tighten monetary policy sooner than anticipated to curb inflation and prevent financial imbalances. An early policy shift could weaken growth, particularly as the U.S. is set to impose reciprocal tariffs on April 2.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The FSC\u2019s focus on loan management reflects rising concern over housing market imbalances. If household debt growth accelerates further, banks could tighten credit availability to prevent excessive leverage \u2014 but this could squeeze real homebuyers and increase market volatility. The government\u2019s cautious stance reflects the narrow margin for error in balancing financial stability with economic growth, as missteps could trigger market instability or a housing correction.<\/span><\/p>\n<div class=\"content-tags\"><a href=\"https:\/\/koreapro.org\/tag\/business-economy\/\"><span class=\"tag\">Business &amp; Economy<\/span><\/a><\/div>","protected":false},"excerpt":{"rendered":"<p>The Bank of Korea (BOK) reported on Monday that overall money supply increased by 0.5% month-on-month and 7.5% year-on-year in January, signaling rising liquidity in the financial system. Cash and demand deposits also increased by 0.6% month-on-month and 5.9% year-on-year. Financial institutions\u2019 liquidity rose by 0.4% from the previous month, while broad liquidity increased by [&hellip;]<\/p>\n","protected":false},"author":10407,"featured_media":2208756,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[30],"tags":[24],"class_list":["post-2208755","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-briefings","tag-business-economy"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>South Korea\u2019s rising liquidity and debt fuel inflation and housing concerns - Korea Pro<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/koreapro.org\/2025\/03\/south-koreas-rising-liquidity-and-debt-fuel-inflation-and-housing-concerns\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"South Korea\u2019s rising liquidity and debt fuel inflation and housing concerns - Korea Pro\" \/>\n<meta property=\"og:description\" content=\"The Bank of Korea (BOK) reported on Monday that overall money supply increased by 0.5% month-on-month and 7.5% year-on-year in January, signaling rising liquidity in the financial system. 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