Choo Kyung-ho: "Fed to Adjust Pace with Usual Rate Hike Magnitude"

Emergency Macroeconomic and Financial Meeting Held

Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho (third from left), Bank of Korea Governor Lee Chang-yong (second from left), Financial Services Commission Chairman Kim Ju-hyun (far right), and Financial Supervisory Service Governor Lee Bok-hyun are posing for a commemorative photo on the 2nd at the Bankers' Hall in Myeong-dong, Jung-gu, Seoul, before the Emergency Macroeconomic and Financial Meeting. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Sejong=Reporter Kim Hyewon] On the 2nd, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho commented on the U.S. Federal Reserve's (Fed) 0.25 percentage point interest rate hike at this year's first Federal Open Market Committee (FOMC) meeting, stating that "the market interprets this as some uncertainty being alleviated."

Deputy Prime Minister Choo held an emergency macroeconomic and financial meeting at the Seoul Banking Hall on the same day to review international financial market trends following the FOMC results, diagnosing that "the Fed is assessed to have adjusted the pace with a conventional rate hike magnitude."

He particularly explained, "International financial markets showed stability overnight as Fed Chair Jerome Powell maintained the existing stance that rate hikes to a restrictive level are appropriate, while also mentioning that the process of inflation slowdown has already begun."

Regarding the domestic financial market, he evaluated that "volatility has eased this year due to the government's market stabilization efforts and expectations of a slowdown in monetary tightening by major countries." However, Deputy Prime Minister Choo expressed concern, stating, "Uncertainty remains high as difficulties in the real sector, such as continued export sluggishness, are expanding and inflation is expected to remain at a high level for the time being, so we cannot afford to let our guard down even for a moment."

He continued, "In particular, if the difference in perception between the Fed and the market regarding the future interest rate path, including the possibility of rate cuts within the year, persists for some time, it could act as a factor increasing volatility in international financial markets going forward." He emphasized, "The economic and financial teams will strengthen market monitoring through close cooperation and respond promptly according to contingency plans for each sector, while more precisely seeking the optimal policy mix."

Deputy Prime Minister Choo stated, "We will solidify the stability of the domestic financial market," adding, "We will utilize the response capacity secured at over 40 trillion won to spread market stability and expand the scope and limits of support for bond collateralized securities (P-CBO) to ensure that companies with low credit ratings do not face difficulties in issuing corporate bonds."

He also conveyed, "We will stabilize the project financing (PF) market by expanding guarantee support for PF sites, and actively guide the soft landing of the real estate market through expanded liquidity support for construction companies and normalization of real estate loan regulations."

To alleviate financial burdens caused by high interest rates, the plan is to supply 10 trillion won worth of policy-based financial services for low-income households within this year, and to smoothly implement tailored financial support for vulnerable groups such as emergency living expense loans and the supply of low-interest special home mortgage loans. Additionally, efforts will be made to improve the domestic capital market investment environment by enhancing foreign exchange market accessibility through allowing participation of foreign financial institutions based overseas and extending market hours, as well as by abolishing the foreigner registration system, gradually mandating English disclosures for listed companies, and inclusion in the World Government Bond Index (WGBI).