Bank of Korea Governor Lee Ju-yeol struck down the idea of the Korean central bank mulling its own version of a quantitative easing program to prop up the economy as suggested by a senior ruling party official, saying the monetary maneuvering remains in a bind due to weak structural fundamentals and the dangerous level of household debt.

He hinted that the central bank would revise down this year’s growth estimate from earlier around 3 percent in the next outlook due in April.

“It isn’t right for the central bank to comment on campaign platform by a certain party,” Lee said during a press conference to mark his second year in office. “What I can say though is that the BOK is doing its best to bring back economic vitality and support overall restructuring efforts.”

Lee’s comments were made a day after Kang Bong-kyun, head of the Saenuri Party’s campaign committee, urged the BOK to be more bold and implement a Korean version of quantitative easing by purchasing bonds issued by the state-run Korea Development Bank to accelerate corporate restructuring. Kang also suggested that the central bank directly purchase mortgage-backed securities to bring down the size of household debt.

Kang’s campaign pledge, which was made ahead of the general elections in April, immediately sparked criticism that the ruling party was infringing on the jurisdiction of the central bank.

Lee said that he believes the ruling party’s demand is intended to urge the BOK to play a more active role in resolving issues related to restructuring and household debt.

Lee suggested the possibility of lowering Korea’s growth rate outlook in April. He told reporters that exports continue to struggle and there is a slowdown in the domestic economy, pulling down the first-quarter growth from what the central bank had expected early on in the year.

“There is a possibility that this year’s growth rate will fall below 3 percent, which was the forecast made earlier on in the year,” Lee said.

The governor remained reserved about further cuts in the base rate or other easing action.

“It is true that uncertainty in the financial market has eased to some extent recently,” Lee said. “(However), there are still fundamental dangers - structural weaknesses and poor external demand - that can offset any effect from rate action. And then there is the household debt problem,” he said.

Every day had been a challenge during the last two years in office, but the biggest difficulty was making forecast about the future, he said.

He also warned against stigmatizing the propensity of monetary policy committee members upon who recommended them. Many have been expecting the two of the four nominees to replace outgoing committee members would be dovish and side with the government’s expansionary position as they were recommended by the government side.

By Chung Ui-hyun

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]