Vice Minister of Economy: "US Fed Opens Possibility of March Rate Hike, but Domestic Impact is Limited"

[Asia Economy Sejong=Reporter Son Seonhee] As the US Federal Reserve's Federal Open Market Committee (FOMC) mentioned the 'possibility of a rate hike in March,' the government stated on the 27th, "Overnight, the international financial markets digested the recent FOMC results and showed generally limited volatility, so the impact on the domestic financial market is expected to be minimal."

Lee Eokwon, the 1st Vice Minister of Strategy and Finance, held a 'Macroeconomic Financial Meeting' on the morning of the same day at the Bankers' Hall in Jung-gu, Seoul, to review domestic and international financial market trends related to the US Fed's FOMC results and the instability in Ukraine.

Earlier, the US Fed decided to keep the benchmark interest rate unchanged and maintain the pace of asset purchase tapering at $30 billion per month as decided in the previous month's meeting. However, regarding the timing of the rate hike, it mentioned that "it would be appropriate to raise rates soon," significantly increasing the likelihood of a benchmark rate hike in March.

Regarding this, Vice Minister Lee said, "The fundamentals of our economy remain solid," but added, "Since uncertainties remain regarding the development of global inflation, which will affect the pace of monetary policy normalization in the future, we cannot let our guard down." He especially expressed concern that "in addition to reshoring efforts responding to the risks of global supply chains highlighted by COVID-19, worries about structural inflationary pressures continue."

Vice Minister Lee stated, "We will closely monitor the domestic and international financial market conditions and trends related to the US Fed's monetary policy, and if necessary, proactively implement market stabilization measures according to the contingency plans prepared in advance in cooperation with relevant agencies." He added, "Regarding the government bond market, to prevent the additional budget financing from increasing market volatility, we will distribute the additional issuance of treasury bonds as evenly as possible by period," and "if necessary, we plan to promptly activate market stabilization measures such as simple purchases of treasury bonds in policy coordination with the Bank of Korea."

Also, since the Korean benchmark interest rate may be raised additionally as well as the US rate, he emphasized, "The repayment burden of accumulated household debt may increase, so we will do our best to manage the household debt growth rate this year to the pre-COVID-19 level of 4-5% through quarterly total volume checks and expanded application of the Debt Service Ratio (DSR) on a borrower basis."

Furthermore, he said, "We will thoroughly prepare for risks that may arise from asset price declines," and "we will closely examine real estate-related loans and funds, the real estate financial exposure, and proactively identify and manage potential risk factors."

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