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UPDATE 1-S.Korea chief says household debt growth still high

* Bank of Korea’s Lee: household debt growth still high

* Lee: growth, inflation projections unchanged

* Investors see no rate hike in 2019 (Adds quotes, fund manager comment)

By Hayoung Choi and Choonsik Yoo

SEOUL, Dec 19 (Reuters) – South Korea’s central bank chief said household debt growth has fallen slightly but was still high, while the prospects for economic growth and inflation were little changed from projections made in October.

“On the financial stability aspect, household debt growth has fallen somewhat but you have to note that the rate has fallen from a very high level,” Bank of Korea Governor Lee Ju-yeol said during a year-end dinner meeting with reporters late on Tuesday.

The remarks came as investors increasingly expect the central bank to keep the base rate unchanged throughout next year having raised it by 25 basis points to 1.75 percent on Nov. 30 to curb the household debt growth.

Governor Lee cited China-U.S. trade disputes, falling semiconductor prices and the hawkish U.S. central bank policy as risks to South Korea’s economy, which relies heavily on exports for growth.

He said he would update the central bank’s views on the economic and financial conditions in January, when it is scheduled to revise its economic forecasts. Economists and fund managers expect downward revisions.

“It is highly likely that (the Bank of Korea) will downgrade its economic growth and inflation forecasts when it next revises forecasts,” said Lee Ki-won, fixed-income fund manager at Midas International Asset Management.

On Monday, the finance ministry cut next year’s economic growth target to 2.6-2.7 percent from 2.8 percent projected in July, and lowered its 2019 inflation forecast to 1.6 percent from 1.8 percent.

The Bank of Korea’s latest projections are for Asia’s fourth-largest economy to grow 2.7 percent and inflation to reach 1.7 percent next year. (Editing by Sam Holmes)


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