The Bank of Korea: "Limited Impact of US FOMC Results on International Financial Markets... Enhanced Monitoring"

Deputy Vice President Park Jong-seok Presides Over Situation Assessment Meeting

[Asia Economy Reporter Seo So-jung] The Bank of Korea evaluated that the impact of the U.S. Federal Open Market Committee (FOMC) results on the international financial market was limited, as the outcomes did not significantly deviate from market expectations.

On the morning of the 17th at 8 a.m., the Bank of Korea held a situation review meeting chaired by Deputy Governor Park Jong-seok to assess the international financial market situation and the impact on domestic financial and foreign exchange markets following the U.S. FOMC results.

Deputy Governor Park stated, "Although the FOMC meeting results were considered somewhat hawkish (favoring monetary tightening), the impact on the international financial market was limited as the outcomes did not significantly deviate from market expectations, and there were expectations of progress in negotiations between Ukraine and Russia."

Deputy Governor Park added, "We must closely monitor the acceleration of monetary policy normalization in major countries, the developments in the Ukraine-Russia war, and global supply chain disruptions, as these could have considerable effects on the domestic financial market, growth, inflation, and the overall real economy."

At this meeting, the U.S. Federal Reserve raised the policy interest rate by 0.25 percentage points from the current level. The Fed announced in its policy statement that the rate hike was decided to return inflation to the 2% target and maintain a robust labor market, and that further increases would likely be appropriate going forward.

The Fed significantly revised its inflation forecast upward from 2.6% to 4.3%, while lowering this year's growth forecast sharply from 4.0% to 2.8%. The dot plot, which shows FOMC members' expectations for policy rates, was also revised upward from 0.9% to 1.9% by the end of this year, indicating that many participants expect six additional rate hikes within the year.