The Bank of Korea: "Expectations for US Giant Step Increase... Strengthening Monitoring of Capital Outflows and Exchange Rates"

The Bank of Korea Reviews Market Conditions After the Holiday
US and Europe Expected to Accelerate Monetary Tightening
Growing Expectations for a Giant Step in the US

[Image source=Yonhap News]

The Bank of Korea announced on the 13th that, with growing expectations of a 'giant step' (a 0.75 percentage point increase in the benchmark interest rate) by the U.S. Federal Reserve (Fed) next week, it will further strengthen monitoring of capital outflows and fluctuations in the won-dollar exchange rate.

On the morning of the 13th at 8 a.m., the Bank of Korea held a 'Market Situation Review Meeting' chaired by Deputy Governor Lee Seung-heon to assess the international financial market conditions during the Chuseok holiday period and discuss the potential impact on the domestic financial and foreign exchange markets.

At the meeting, Deputy Governor Lee explained that during the Chuseok holiday period, the international financial markets viewed the European Central Bank's (ECB) 0.75 percentage point rate hike and Fed Chair Jerome Powell's monetary policy conference remarks as hawkish (favoring monetary tightening), but these were generally in line with market expectations, resulting in limited volatility in key countries' price variables.

Regarding the U.S. Dollar Index (DXY), it declined due to the ECB's hawkish remarks and expectations of a slowdown in the U.S. August Consumer Price Index (CPI) inflation rate.

However, the Bank of Korea judged that, given the persistent high inflation prompting a steep tightening stance in monetary policies by the Fed and ECB, the rapid depreciation of the Japanese yen, and growing concerns over China's economic downturn, volatility in the domestic financial and foreign exchange markets is likely to increase.

Deputy Governor Lee stated, "With rising expectations of a 0.75 percentage point increase at next week's Federal Open Market Committee (FOMC) meeting, I urged that monitoring of capital inflows and outflows and trends in the won-dollar exchange rate in the domestic financial and foreign exchange markets be further strengthened."

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