Seoul: Uncertainty over the path of the United States' monetary policy is expected to persist, though markets have remained broadly stable following the Federal Reserve's latest interest rate decision, a senior official of the South Korean central bank said Thursday. On Wednesday (U.S. time), the Fed kept its benchmark interest rate unchanged at the 3.5-3.75 percent range following three successive cuts since September, a decision that will continue to put the gap between the key rates of South Korea and the United States at up to 1.25 percentage points for the time being.
According to Yonhap News Agency, Bank of Korea (BOK) Deputy Gov. Yoo Sang-dai highlighted potential continued uncertainty over the U.S. monetary policy path, citing Fed Chair Jerome Powell's press conference and the timeline for his successor's nomination as contributing factors. Yoo emphasized the need for vigilance amid ongoing uncertainties related to U.S. tariff policies, fiscal health concerns of major economies, and geopolitical risks.
During the press conference, Powell noted that the U.S. economy had grown at a solid pace last year and was entering 2026 on a firm footing. He emphasized the Fed's readiness to adjust the policy rate based on incoming economic data. Amid U.S. President Donald Trump's increasing pressure to influence the Fed, Powell defended the central bank's independence as a standard practice in advanced economies and democracies worldwide.
The BOK is expected to maintain its current rate pause, following its latest policy meeting where it kept the key rate at 2.5 percent for the fifth consecutive time since July. This decision aims to support financial stability amid a weak won and manage inflationary pressures. The interest rate gap between South Korea and the U.S. has persisted since July 2022, with experts warning that a wider spread could lead to foreign capital outflows and further weaken the Korean won.
The local currency has remained below the critical 1,400 won level, reaching a multiyear low of under 1,480 won recently due to the dollar's strength, geopolitical risks, and significant overseas securities investments by domestic investors. The won opened at 1,429.6 per dollar Thursday, reflecting a decrease of 7.1 won from the previous session.