Government Reviews FOMC Impact: "Vigilant Over Diverging Monetary Policies Among Major Economies"

Lee Hyungil, Vice Minister of Strategy and Finance, is presiding over the 'Macroeconomic Financial Meeting' held via video conference at the Government Complex Sejong on the morning of the 11th. (Source: Ministry of Strategy and Finance)

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The government announced that it will remain vigilant and respond proactively to uncertainties arising from the divergence in monetary policies among major economies, including the U.S. Federal Open Market Committee (FOMC) decision to cut its policy rate.

Lee Hyungil, First Vice Minister of Strategy and Finance, stated at the Macroeconomic Financial Meeting on the 11th, "We will continue to operate the 24-hour joint monitoring system for financial and foreign exchange markets, and I urge relevant agencies to respond promptly in close cooperation when necessary."

Attendees at the meeting included Yoo Sangdae, Deputy Governor of the Bank of Korea; Kwon Daeyoung, Vice Chairman of the Financial Services Commission; and Lee Sehoon, Senior Deputy Governor of the Financial Supervisory Service. They discussed the impact of the FOMC rate cut on domestic and international financial and foreign exchange markets, as well as response strategies.

As expected, the FOMC, which convened overnight, lowered its benchmark rate by 0.25 percentage points to a range of 3.50-3.75%. This marks the third consecutive 0.25 percentage point cut following those in September and October. Jerome Powell, Chair of the U.S. Federal Reserve, stated during a press conference, "With the adjustments since September, our policy is now within a reasonable range of estimates of the neutral level," adding, "We are in a good position to wait and observe changes in economic conditions going forward."

Global financial markets viewed the rate cut as in line with expectations, but focused on the Federal Reserve's revised outlook for lower inflation. As a result, U.S. Treasury yields declined and the U.S. dollar weakened.

The domestic stock market also interpreted Chair Powell's remarks as less hawkish than anticipated, with the KOSPI opening at 4,163.32, up 0.68% from the previous session.

Participants shared the view that "while the United States is likely to continue its rate-cutting stance, Japan is expected to raise its policy rate soon, indicating that monetary policies among major economies are diverging and market uncertainty remains high."

They assessed that "due to the differentiation in monetary policies and changes in interest rate differentials among major economies, global capital flows and the volatility of stock prices, interest rates, and exchange rates in both domestic and international markets could increase."

They further noted, "Although the domestic stock market has remained relatively stable recently, the rise in government bond yields and concerns over increased foreign exchange market volatility mean it is necessary to closely monitor monetary policies and economic indicators of major economies and to strengthen market monitoring."

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