The Bank of Korea Says "FOMC Results Somewhat Hawkish... Market Stabilization Measures If Necessary" (Comprehensive)

Bank of Korea Holds Monetary and Financial Measures Meeting Immediately After US FOMC

Lee Seung-heon, Deputy Governor of the Bank of Korea [Photo by Yonhap News]

[Asia Economy Reporter Eunbyeol Kim] On the 16th (local time), the U.S. Federal Reserve (Fed) hinted at the possibility of advancing the timing of interest rate hikes at the Federal Open Market Committee (FOMC) meeting. In response, the Bank of Korea held a 'Monetary and Financial Measures Task Force' meeting on the 17th to discuss market impacts and response strategies.

At 8 a.m. that day, the Bank of Korea held a meeting chaired by Deputy Governor Seunghun Lee to review the trends in international financial markets following the FOMC meeting results and assess their impact on the domestic financial market, as well as to discuss response directions. Attendees included Deputy Governor Lee, the Director of the Monetary Policy Bureau, the Director of the International Bureau, the Director of the Financial Market Bureau, the Public Relations Officer, the Head of the Investment Management Department, the Head of the Market Coordination Team, and the Head of the Foreign Exchange Market Team.

At the meeting, Deputy Governor Lee stated, "The outcome of this FOMC meeting was evaluated as somewhat more hawkish (favoring monetary tightening) than expected," adding, "Accordingly, in the international financial markets, U.S. long-term interest rates rose significantly, stock prices declined, and the U.S. dollar strengthened."

At the FOMC meeting, the Fed kept the policy rate unchanged at 0.00?0.25% as expected and decided to maintain the current asset purchase scale (at least $120 billion per month), continuing its existing accommodative policy stance. However, it assessed the current economic situation as improved due to expanded vaccine distribution and improvements in economic activity and employment, revising upward the forecasts for economic growth and inflation (PCE) compared to March. The dot plot, which shows Fed officials' expectations for policy rates, indicated an increase in the number of participants expecting rate hikes by 2023. The median forecast anticipates a 50 basis point (1bp = 0.01 percentage point) increase during 2023.

Deputy Governor Lee said, "There is a possibility of increased volatility in domestic and international financial markets due to changes in economic and inflation conditions in major countries such as the U.S. and the resulting shifts in policy expectations," adding, "We plan to strengthen monitoring of market instability factors, continuously review response measures, and implement market stabilization measures as necessary."

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