The chief of South Korea's central bank on Thursday reiterated the importance of structural reform in spurring growth, acknowledging the bank's monetary policy has a limited impact on Seoul's policy initiative to restructure the labor and financial market.

"Since the effects of accommodative monetary policy in boosting demand cannot last for a long time, structural reforms to enhance productivity in the financial and labor sectors are essential for sustainable growth," Bank of Korea Gov. Lee Ju-yeol said in the opening remarks of a forum hosted by the central bank.

"Demographic change is weakening inflationary pressures by reducing the number of people in employment, as well as the propensity to consume, and it has also been altering the transmission channels of monetary policy," he said.

Seoul has been beefing up efforts to reform the economy after four rounds of rate cuts and stimulus measures have failed to prop up growth in Asia's fourth-largest economy.

The BOK slashed its key interest rate by a total of 1 percentage point to a record low of 1.5 percent in the past year, but the move has failed to give a much-needed push to growth and instead sent household debt spiraling.

As of end-March, the country's household debt totaled 1,099.3 trillion won ($927 billion) as people increasingly borrowed to purchase homes amid the low rate trend.

Lee acknowledged the negative impact of the previous rate cuts and raised the need to better monitor financial risks stemming from them.

"Central banks need to look at whether a monetary easing response to low inflation may produce negative side effects in the economy," Lee said. "In Korea, for example, a series of policy rate cuts has been accompanied by rapid growth of household debt.

"So we are now closely looking at the risks in the financial system due to the buildup of household debt, as well as at the macroeconomic risks, such as the shrinking of consumption capacity." (Yonhap)