SEOUL (Reuters) – South Korea’s monetary policy board was divided over when to cut interest rates with a majority of the seven-member board concerned about lower borrowing costs leading to higher housing prices, July meeting minutes showed on Tuesday.

The Bank of Korea said at the meeting that it was time to prepare for a pivot to rate cuts after leaving the benchmark interest rate steady at a 15-year high of 3.50% for the 12th straight meeting, as expected.

While the decision was unanimous, the seven-member board appeared divided over whether to act, as some worried that cutting prices could lead to price increases in Seoul’s already expensive housing market, while others increasingly focused on preserving a soft landing for the economy.

At least five board members said risks to financial stability were a concern for the central bank due to rising house prices.

“In summary, inflation is easing towards (the bank’s) target level but we should still be aware of upside risks and the risks related to interest rate cuts are greater now because of the increases in household debt and the house price increases we are seeing now,” said one of the seven board members.

Concerns about inflation have recently been replaced by concerns that household debt is increasing rapidly and that consumption is declining quite quickly.

Any rate cuts should be implemented “after factoring in the level of inflation over the medium term relative to our inflation target, macroeconomic policy changes as well as currency market changes,” another board member said.

Headline inflation for June eased to an 11-month low of 2.4%, close to the 2% target.

South Korea’s economy shrank unexpectedly in the second quarter, posting the steepest decline since 2022 as falling consumer spending undermined an export boom to bolster expectations that a rate cut could come in the coming months.

(Reporting by Cynthia Kim; Editing by Ed Davies)