FOMC Unanimously Holds Benchmark Interest Rate at 1.50~1.75%
[Asia Economy Reporter Jang Sehee] Yoon Myeon-sik, Deputy Governor of the Bank of Korea, said on the 30th that it is premature to expect a rate cut due to the spread of the novel coronavirus infection (Wuhan pneumonia).
Deputy Governor Yoon made this remark after presiding over a situation review meeting related to the US Federal Reserve's (Fed) interest rate decision at the Bank of Korea headquarters in the morning and meeting with reporters.
He emphasized, "SARS, MERS, and the novel coronavirus should not be the sole factors in considering the base interest rate; we need to look at the overall impact as well as the underlying inflation and financial conditions. It is difficult to take immediate preemptive action."
He added, "At that time, the rate cuts were also influenced by not only infectious diseases but also poor economic and inflation conditions."
Deputy Governor Yoon said, "I believe the novel coronavirus will be reflected in growth rate, inflation, and current account balance, but at this point, there is uncertainty about the extent, so it is too early to comment." He also showed caution, saying, "There is still uncertainty, so it is premature to specify the extent."
He continued, "We will continue to closely monitor market conditions resulting from the spread of the novel coronavirus and watch with vigilance the impact it may have on our economy."
Regarding the Fed's decision on the 29th (local time) to keep the base interest rate unchanged at 1.50-1.75% through the Federal Open Market Committee (FOMC), he explained, "The rate freeze itself aligns with market expectations."
However, he expressed, "After Fed Chair Jerome Powell's press conference, the rate decline widened and stock prices fell; the market seems to interpret Powell's press conference as dovish (favoring monetary easing)." The Fed unanimously kept the federal funds rate (FFR), the monetary policy benchmark rate, at 1.50-1.75%.
In its statement, the Fed changed its view on inflation from the previous symmetrical 2% 'near' to 'returning to.' Regarding this, Deputy Governor Yoon said, "Chairman Powell stated in the press conference that the previous wording could be misinterpreted, so it was changed. Therefore, I think the Fed's stance has not significantly changed compared to before."
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