South Korea's rising household debt hit a new record last quarter, supporting the idea that the central bank will raise interest rates as early as this week to curb the debt bubble.
Total household credit surged 10.3% year-on-year to 1806 trillion won ($1.54 trillion), the central bank said in a statement on Tuesday. The increase of 169 trillion won was the biggest since data were available in 2003.
Credit grew by 41.2 trillion won in the second quarter from the previous quarter, the largest month-on-month increase in the same period.
The ballooning debt confirms the Bank of Korea's concern that financial imbalances are rising at a rate that could harm the economy after the economy recovers from the epidemic. With government measures failing to rein in household debt, regulators are expecting the central bank to step in to curb the lending spree behind soaring house prices.
Economists are divided over whether the central bank of Korea will raise interest rates to a record low of 0.5% at Thursday's meeting. Even if the policy committee chooses to sit tight this week, the market still expects the central bank to raise interest rates sometime later this year. A policy commissar advocated raising interest rates by 25 basis points in July, and the minutes show that some policy commissars agree that policy tightening is necessary to some extent.