SEOUL– South Korea’s finance ministry said Thursday it is closely monitoring the potential impact of the U.S. Federal Reserve’s overnight rate hike and North Korean provocations on the country’s economy.
“Following the Fed’s rate hike, uncertainties for the South Korean and global financial markets have grown. We plan to respond by staying more vigilant than any other time,” the Ministry of Economy and Finance said in a press release.
Earlier in the day, Finance Minister Choo Kyung-ho and other officials, including Bank of Korea (BOK) Gov. Rhee Chang-yong, held a closed-door emergency meeting on macroeconomic situations.
The meeting came hours after the Fed raised its benchmark rate by another 75 basis points on Wednesday (local time) to a target range of 3.75 to 4 percent.
The move is expected to pressure South Korea to continue its monetary tightening further.
Last month, the Bank of Korea raised its key policy rate by 0.5 percentage point to 3 percent to tackle inflation. It marked the second-ever big-step increase and the eighth rise in borrowing costs since August last year amid the inflation pressure.
In a separate meeting with officials, BOK Deputy Gov. Lee Seung-heon vowed to take measures “to stabilize the market at an appropriate time” when needed.
The Fed’s latest rate hike was widely expected, but Fed Chair Jerome Powell’s hawkish remarks have flared up volatility in the global financial market, Lee said.
Powell said in a press conference on Wednesday that it is “very premature” to be thinking about pausing of aggressive monetary tightening.
“In terms of North Korean provocations, we believe there will be no notable impact on the local financial market, considering the response from the global market until the early morning,” the ministry added. “We also plan to closely watch related market situations.”
On Thursday, North Korea fired three missiles toward the East Sea, a day after launching a barrage of missiles, including one that flew across its de facto maritime border with South Korea for the first time since the end of the 1950-53 Korean War.
The benchmark Korea Composite Stock Price Index dipped 7.7 points, or 0.33 percent, to 2,329.17 on Thursday.
The local currency closed at 1,423.80 won against the greenback, down 6.4 won from Wednesday’s close.
Source: Yonhap News Agency