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S. Korea to thoroughly prepare for possible financial volatility on Fed's rate decision

Arirang News 2018-12-20

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정부, 미국 금리인상에 "국내시중금리 감내할 수준...철저 대비"

The U.S. Federal Reserve raised its key interest rate by a quarter-point on Wednesday...the fourth hike this year...putting the target range for its benchmark funds rate to a range between 2-point-25 and 2-point-5 percent.
Seoul's financial authorities held emergency meetings to monitor the markets and brace for possible volatility.
Kim Hyesung starts us off.
Following the Fed's rate hike, South Korea's economic policymakers vowed to work together closely and strengthen the monitoring of financial markets.
Officials from the finance ministry and the Bank of Korea on Thursday examined the effect the Fed's rate decision might have on global markets... as well as on domestic financial and foreign exchange markets.
U.S. rates are now 75 basis points higher than Korea's, but citing South Korea's strong economic fundamentals, first vice minister of the economy and finance Lee Ho-seung said the domestic financial market can withstand the rate difference and that the government will strengthen financial institution's risk management and run a contingency plan if there's an increase in financial market volatility.
As of market close Thursday, Korea's benchmark Kospi had fallen zero-point-nine percent and the second-tier Kosdaq had shed zero-point-six percent.
For the chief of Korea's central bank, however, the concern was not the widely expected December rate hike, but the pace of rate hikes next year, which the chair of the Fed addressed in his announcement.
"I think it is more likely that the economy will grow in a way that will call for two interest rate increases over the course of next year."
That's one fewer than the three rate hikes the Fed projected back in September.
Bank of Korea governor Lee Ju-yeol said that slower rate hikes by the Fed give global central banks more room to maneuver in terms of monetary policy, but that they also mean slower U.S. growth for 2019... and he said he will consider a range of risk factors like global growth and Korea's record high 1-point-three trillion U.S. dollar household debt when making the bank's rate decisions next year.
Kim Hyesung, Arirang News.

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