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Bank of Korea maintains rate amid geopolitical tensions

EditorPollock Mondal
Published 11/02/2023, 06:04 PM

KQ11
0.13%

The Bank of Korea (BOK) has expressed lessened concerns over the U.S. Federal Reserve's decision to maintain its 22-year high interest rates, a move that has helped partially alleviate market worries amidst ongoing global uncertainties, including the Israel-Hamas war. The BOK's interpretation of Fed Chairman Jerome Powell's statements indicates a continuous restrictive monetary policy aimed at reaching inflation targets.

The Federal Open Market Committee (FOMC) meeting's outcome, which held steady on policy rates, aligned with market expectations and was seen as "dovish" by the BOK. Deputy Governor Lee Sang-hyeong highlighted that fears of further rate hikes were partially assuaged due to a rise in Treasury yields. However, he underscored Powell's commitment to a restrictive monetary policy for achieving inflation targets.

In response to the escalating U.S. loan interest rates resulting from the unaltered federal rate and high household debt, the BOK decided to hold its rate at 3.50 percent. A member of the Monetary Policy Board advocated for flexible adjustments in light of these uncertainties.

The BOK and government have prepared a contingency plan to stabilize markets if needed, standing ready amidst geopolitical tensions and an economic downturn. They continue to vigilantly monitor the repercussions of extended restrictive monetary policies and global geopolitical events on financial and foreign exchange markets.

In response to these developments, South Korea's Kospi and Kosdaq indices saw increases on Thursday. The BOK's stance on preserving its rate comes as Hana Bank points out that the U.S. Federal Reserve's position has eased market worries.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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