SEOUL — In response to the ongoing economic climate, South Korea has announced an enhancement in its market monitoring protocols, following signals from the United States that it may pursue additional interest rate increases.
According to Yonhap News Agency, the vigilance is due to potential rises in the U.S. interest rates and current geopolitical concerns. The ministry's announcement came after the U.S. Federal Reserve maintained its benchmark rate but suggested that the monetary tightening cycle might not be over as the fight against inflation continues.
The rate currently stands between 5.25 percent and 5.50 percent, marking the highest point since 2001. First Vice Finance Minister Kim Byoung-hwan, in a macroeconomic meeting joined by senior officials from the Bank of Korea and the Finance Services Commission, emphasized the government's readiness to act on market volatility. "We cannot rule out the possibility of further rate hikes," Kim stated, noting the sustained inflationary pressures and geopolitical uncertainties.
The ministry has committed to preparing for various economic scenarios and is ready to take swift action to reduce any negative impacts from global economic fluctuations on the nation's financial and currency exchange markets.
South Korea's stock market reflected a positive response to the Federal Reserve's decision, with the main index rising by nearly 2 percent. The Bank of Korea echoed a cautiously optimistic tone, recognizing the potential for relief from the Fed's pause on rate hikes, while also acknowledging Chair Jerome Powell's emphasis on a continued restrictive monetary policy.
Deputy Governor of the Bank of Korea, Lee Sang-Hyeong, highlighted the need to monitor the impact of several global factors, including inflationary trends, economic slowdowns, and extended monetary tightening from major economies, alongside the current conflict between Israel and Hamas.
The Bank of Korea itself has held its key interest rate at 3.5 percent consistently, reflecting a strategic pause amid the global economic landscape.