South Korea's top central banker said Monday that the central bank would maintain its easing policy to help Asia's fourth-largest economy keep its growth momentum, while closely monitoring financial stability.
  

The Bank of Korea has been keeping its policy rate steady at a record low of 2 percent for the fourth straight month up to February after trimming the rate two times, in August and October.
  

"Going forward, an easing policy mode will be maintained to support a growth momentum," BOK Gov. Lee Ju-yeol told lawmakers earlier in the day. "At the same time, the central bank will keep in mind financial stability in conducting monetary policy."
  

In a report to the National Assembly, the central bank said the recovery still remains weak amid feeble sentiment but forecast the economy to see steady improvement on the back of a rebound in the global economy and low oil prices.
  

As to whether the central bank would trim or raise the base rate, the BOK chief said, "it is hard to definitely say in either direction, and it would depend on the economic situation."
  

Earlier this month, the central bank said it needs to gauge the impact of previous rate cuts and ever-growing household debt that is feared to hurt the economy once rate hikes begin.
  

The South Korean economy expanded 0.4 percent on-quarter during the fourth quarter of last year, marking the slowest pace in more than two years, raising concerns over faltering growth.
  

From a year earlier, Asia's fourth-largest economy expanded 2.7 percent in the October-December period, marking the slowest growth since the second quarter of 2013.
  

On an annual basis, the economy increased 3.3 percent last year, picking up from a 3 percent growth posted in 2013. The figure is slightly lower than the central bank's growth forecast of 3.4 percent for this year.
  

The central bank's two rounds of rate cuts, however, spurred a surge in household debts last year, raising concerns that such snowballing debt could hold back Asia's fourth-largest economy.
  

Household loans by banks increased 37.3 trillion won ($33.6 billion) last year with home-backed loans spiking 35.4 trillion won last year, according to the BOK report.
  

Household debt has been growing sharply as the government tried to prop up domestic demand and property transactions to push growth. In July, the finance ministry unveiled a set of measures to support those goals, such as raising the ceiling for mortgage loans. The policy went into effect on Aug. 1.
  

BOK Gov. Lee has been expressing concerns over rising levels of debts held by households.
 

"Household loan growth eased in January compared with a month earlier, but its upward momentum is still on-going," said the central bank.
  

The BOK said it has been operating a task force since November to monitor the trend of household loans and is working on setting up a new database to assess the exact picture of such loans.
 

But the ratio of such loans souring stood was low at 0.6 percent and 0.7 percent each in the third and fourth quarter of last year, it noted.
 

The central bank also said it will beef up monitoring on financial system as much expected rate hikes in the U.S. and instability in emerging markets could boost external risks.
  

"(The central bank) would take preemptive measures in response to increasing instability in the global financial market," it said.
  

In case of a crisis, the central bank will review the possibility of selling its foreign assets and the cost of securitizing them, it added.
  

The BOK also said it remains vigilant against volatility in the currency market as foreign exchange rates have a grave impact on exports.
  

Lee said he is fully aware of the impact that the yen's sharp decline has on South Korea's exports. South Korean exporters and their Japanese rivals compete directly in overseas markets over products ranging from electronic goods to automobiles.
  

"I think a sharp volatility in the currency market is undesirable," Lee said.
  

He noted that deflationary pressure is growing in the country, but there is a low possibility of prices posting a negative growth. "Such concerns (over deflation) are excessive," said Lee.
  

South Korea's consumer prices grew at less than 1 percent for the second month in a row in January, deepening worries of deflation.
  

The country's consumer price index edged up 0.8 percent last month from a year earlier, unchanged from the gain reached in December, government data showed.
  

The figure marks the lowest since October 2013, when consumer prices rose 0.9 percent on-year.
  

The country's annual inflation rate stood at 1.3 percent for 2014, unchanged from the year before. (Yonhap)