Fed Chair Powell Warns "Economic Recovery Still Far Off," Cautions Optimism... KRW-USD Exchange Rate Surges (Comprehensive)

Fed Holds Interest Rates Steady, Maintains Asset Purchases... No Additional Stimulus Measures
Safe-Haven Dollar Demand Strengthens Amid US Stock Market Plunge... Dollar Value Surges Sharply

[Image source=Yonhap News]

[Asia Economy reporters Eunbyeol Kim and Hyunwoo Lee] Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), warned against optimism, stating that the economic damage caused by the COVID-19 pandemic is still ongoing. Although the U.S. benchmark interest rate was held steady and the asset purchase program was maintained, the U.S. stock market, which had hoped for additional stimulus measures, showed disappointment and declined, while the safe-haven dollar surged sharply. The won-dollar exchange rate rose by as much as 9 won during the trading session.

According to foreign media including CNBC, on the 27th (local time), Powell held a press conference immediately after the Federal Open Market Committee (FOMC) decided to keep interest rates unchanged. He stated, "We have not yet won the war against COVID-19, and the U.S. economy still has a long way to go for a full recovery," adding, "The current situation is very uncertain, and difficult times remain ahead." He emphasized the decision to hold interest rates steady and maintain the existing asset purchase program.

On this day, the FOMC kept the benchmark interest rate at the zero level of 0 to 0.25% and decided to maintain the bond purchase program at about $120 billion per month. Powell particularly stressed the severity of the unemployment situation. He said, "The unemployment rate announced by the U.S. Department of Labor last month is 6.7%, but in reality, it is close to 10%," and added, "It is important to help unemployed people regain jobs as quickly as possible."

Powell dismissed concerns raised mainly on Wall Street about rapid inflation and the Fed’s potential reduction of asset purchases. He said, "Inflation that could burden the economy is unlikely to occur soon," and "The rise in asset prices is a temporary phenomenon driven by expectations of vaccine distribution and stimulus measures, so the Fed will maintain policy patience and keep interest rates and asset purchases steady. It is premature to discuss tapering asset purchases at this time."

However, with no mention of additional stimulus measures expected by Wall Street and the focus on maintaining existing policies, the New York stock market closed lower reflecting policy disappointment. Due to risk aversion, the relatively safe-haven dollar saw strong buying, causing its value to surge. In the Seoul foreign exchange market, as of 9:47 a.m., the won-dollar exchange rate was trading at 1,113.98 won per dollar, up 9.67 won from the previous day. The won-dollar rate started at 1,109.4 won, up 5.0 won from the previous close, and rose to the 1,115 won level during the session.

This content was produced with the assistance of AI translation services.