BOK: "FOMC Decision in Line with Market Expectations... Future Stance to Become More Cautious"

"The U.S. Federal Reserve's monetary policy stance is expected to become more cautious going forward."

Jongwoo Park, Deputy Governor of the Bank of Korea. Yonhap News Agency

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Jongwoo Park, Deputy Governor of the Bank of Korea, stated at a market situation review meeting on December 11 regarding the outcome of the U.S. Federal Open Market Committee (FOMC) that "the Fed's rate cut decision overnight was in line with market expectations." He added, "Given the widening differences of opinion within the Fed, the content of the policy statement, and Chair Powell's press conference, the future monetary policy stance is expected to become more cautious."

He continued, "We will closely monitor market conditions with vigilance, as external risk factors persist, including Japan's interest rate hike, signs of monetary policy shifts in the European Union and Australia, concerns over fiscal soundness in major economies, and ongoing uncertainties related to U.S.-China trade negotiations."

At this FOMC meeting, the Fed cut its policy rate by 0.25 percentage points (25bp), with three members dissenting. In its Summary of Economic Projections (SEP), the Fed raised its growth outlook and lowered its inflation projections for 2025 and 2026. The policy rate forecasts were maintained at 3.4% for 2026, 3.1% for 2027, 3.1% for 2028, and 3.0% for the long term.

The policy statement included new language about "the extent and timing" of additional adjustments, while Fed Chair Jerome Powell assessed that the policy rate has entered the neutral range. He also noted that downside risks to employment have increased significantly and maintained a cautious stance, stating that future policy decisions would be data-dependent.

Reflecting the FOMC outcome, U.S. Treasury yields fell and the U.S. dollar weakened in the international financial markets, while stock prices rose.

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