Vice Minister Ki Jae: "Limited Impact from US FOMC Outcome... Risks like Interest Rate Hikes, Support for Vulnerable Groups" (Update)

Presiding over the Macroeconomic and Financial Meeting on the 16th

"Responding to Risks such as Inflation and the Omicron Variant"

Lee Eok-won, First Vice Minister of the Ministry of Economy and Finance, presides over and delivers opening remarks at the Macroeconomic Financial Meeting held on the 16th at the Bankers' Hall in Myeong-dong, Jung-gu, Seoul. (Photo by Ministry of Economy and Finance)

[Sejong=Asia Economy Reporter Moon Chaeseok] On the 16th, Lee Okwon, the 1st Vice Minister of the Ministry of Economy and Finance, assessed that the decision by the U.S. Federal Reserve (Fed) at the Federal Open Market Committee (FOMC) to double the pace of tapering (asset purchase reduction) compared to the planned speed was within expectations and would not have a significant impact on the domestic financial market. However, he stated that since various risks such as rising interest rates could pose greater difficulties to vulnerable groups in our economy, such as small business owners and low-income households, the government will strengthen its policy response efforts.

Vice Minister Lee chaired the macroeconomic and financial meeting at the Bankers Hall in Myeongdong, Jung-gu, Seoul, and said, "The FOMC outcome does not significantly deviate from international financial market expectations, and as uncertainty from the Fed is resolved, the impact on the domestic financial market is expected to be limited." He analyzed, "Predictions about the Fed’s tapering and interest rate hikes have been largely priced into the market, and the fact that major emerging countries, including South Korea, have preemptively raised interest rates will also help cushion the shock."

Given the numerous risk factors such as global inflation and the spread of the COVID-19 Omicron variant, he emphasized strengthening policy support for vulnerable groups. He explained, "As risk factors like global inflation and variant viruses unfold, uncertainty expands, and if localized events such as the default of China’s Evergrande Group coincide, it is difficult to rule out increased volatility in domestic and international financial markets." He added, "If necessary, market stabilization measures will be proactively and swiftly implemented according to the already prepared contingency plan."

Earlier, the Fed announced on the 15th (local time) after a two-day FOMC regular meeting that it plans to increase the monthly asset purchase reduction from $15 billion to $30 billion starting January next year. The Fed’s tapering completion date is expected to be moved up from June to March next year.

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