The Bank of Korea Says "US Interest Rate Outlook Hawkish... Preparing for Increased Financial Market Volatility"

[Asia Economy Reporter Seo So-jeong] The Bank of Korea has decided to strengthen monitoring as it expects market volatility to increase further due to rising market expectations regarding the final interest rate of the U.S. Federal Reserve (Fed).

On the 22nd 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 situation following the Federal Open Market Committee (FOMC) results and the potential impact on domestic financial and foreign exchange markets.

Deputy Governor Lee Seung-heon stated, "The 0.75 percentage point increase in the policy rate (to 3.00?3.25%) at this FOMC meeting was in line with market expectations, but the outlook on future interest rates and remarks by Jerome Powell, Chair of the Federal Reserve, were evaluated as hawkish, leading to increased volatility in international financial markets."

He added, "It is important to note that the policy rate forecast level on the dot plot (median) was significantly revised upward to 4.4% by the end of this year and 4.6% by the end of next year, and Chair Powell emphasized that the policy rate will be maintained at a restrictive level until there is confidence that inflation is meaningfully declining."

He continued, "As high inflation is expected to persist for some time, leading to further substantial policy rate hikes, global financial markets are likely to continue showing high volatility. In domestic financial and foreign exchange markets, significant volatility is expected due to changes in expectations regarding the magnitude and pace of the Fed's policy rate tightening, movements in major currencies such as the dollar, yen, and yuan, and concerns about China's economic slowdown."

Deputy Governor Lee concluded, "We will continue to thoroughly review step-by-step contingency plans in response to changes in financial and foreign exchange market conditions, closely share and cooperate with the government on information regarding market situations, and promptly implement market stabilization measures if market volatility significantly increases."

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