Economic and Financial Leaders Hold 'Emergency Macro-Financial Meeting'
No Significant Impact on Financial Markets from North Korea Missile Provocations"
Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho, along with heads of financial authorities, are taking a commemorative photo before the Emergency Macroeconomic and Financial Meeting held on the 3rd at the Bankers' Hall in Jung-gu, Seoul. From the left, Lee Chang-yong, Governor of the Bank of Korea; Deputy Prime Minister Choo; Kim Ju-hyun, Chairman of the Financial Services Commission; Lee Bok-hyun, Governor of the Financial Supervisory Service. Photo by Kim Hyun-min kimhyun81@
Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho and Bank of Korea Governor Lee Chang-yong agreed that financial market uncertainty could increase following the U.S. Federal Reserve's (Fed) decision on the 2nd (local time) to implement a "giant step" (a 0.75 percentage point increase in the benchmark interest rate), which may lead to a higher terminal rate. They decided to respond with heightened vigilance.
Regarding North Korea's recent missile provocations over the East Sea, they explained that "there will likely be no significant impact on the domestic financial market," but they will closely monitor the market situation.
On the morning of the 3rd, Deputy Prime Minister Choo chaired an emergency macroeconomic and financial meeting at the Seoul Banking Hall, attended by Governor Lee, Financial Services Commission Chairman Kim Ju-hyun, and Financial Supervisory Service Governor Lee Bok-hyun, to discuss the potential impact of the U.S. Federal Open Market Committee's (FOMC) interest rate hike decision on the market.
The U.S. benchmark interest rate rose from 3.00?3.25% to 3.75?4.00% following the Fed's 0.75 percentage point increase that day. This is the highest level in 15 years, widening the Korea-U.S. interest rate gap to as much as 1 percentage point.
In particular, Fed Chair Jerome Powell hinted at the possibility of slowing the pace of tightening in December but stated that it is premature to pause rate hikes and that the terminal rate could be higher than initially expected. As expectations for a Fed easing its tightening stance diminished, the overnight international financial markets closed with U.S. stock declines, rising interest rates, and a stronger dollar.
Deputy Prime Minister Choo and other attendees explained, "Following the results of this U.S. FOMC meeting, participants agreed that the increased uncertainty from the Fed's rate hikes on our and the global financial markets requires maintaining a higher level of vigilance than ever before and responding accordingly."
The meeting also discussed the potential impact of North Korea's successive missile provocations on the domestic financial market.
Deputy Prime Minister Choo and others stated, "Regarding North Korea's provocations, based on the international financial market's response up to early this morning, no special impact on the domestic financial market is expected yet," adding, "however, since the possibility of latent North Korean risks materializing cannot be entirely ruled out, we will also closely monitor related market conditions."
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