Ministry of Economy and Finance Closely Watching US FOMC Outcome... "Cannot Rule Out Market Volatility"

Kim Yong-beom, 1st Vice Minister of Strategy and Finance [Image source=Yonhap News]

[Sejong=Asia Economy Reporter Son Sun-hee] Although the U.S. Federal Reserve (Fed) indicated it would maintain a 'zero interest rate' policy until 2023, the Ministry of Economy and Finance stated on the 18th that "amid the ongoing COVID-19 situation, it cannot be ruled out that market volatility will continue depending on actual economic indicators and policies."

Kim Yong-beom, the first vice minister of the Ministry of Economy and Finance, convened officials from the macroeconomic and financial departments at the Government Complex Seoul at 7:30 a.m. regarding the results of the Federal Open Market Committee (FOMC) March regular meeting of the U.S. Fed, and said, "Be vigilant and closely monitor market trends." In particular, he urged, "Please ensure market safety so that volatility does not expand in connection with supply and demand burdens in the government bond market."

The Ministry of Economy and Finance's immediate convening of a meeting and disclosure of the FOMC meeting results is interpreted as reflecting the high level of market interest in this FOMC meeting.

In fact, concerns about inflation have recently been raised in the market, leading to a rising trend in interest rates centered on 10-year government bonds. Additionally, the stock market correction occurred mainly in technology and growth stocks on the Nasdaq market. The domestic financial market was also affected by the rise in government bond yields and the KOSPI adjustment. Earlier, Vice Minister Kim also mentioned concerns about inflation several times in official settings.

Although the Fed announced on this day that it would keep the benchmark interest rate at 0-0.25% and maintain the quantitative easing scale (USD 120 billion per month), doubts remain in the market regarding the timing of tapering and interest rate hikes.

The Ministry of Economy and Finance stated that it will continue to thoroughly review domestic and international economic and financial conditions and countermeasures with related agencies such as the Financial Services Commission, the Bank of Korea, the Financial Supervisory Service, and the International Financial Center through macroeconomic and financial meetings.

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