Government Reviews FOMC Impact, "Responding with Caution"

Choi Sang-mok Emergency Financial Meeting "Uncertainty Over Interest Rate Cuts Remains"

Choi Sang-mok, Deputy Prime Minister for Economic Affairs and Minister of Economy and Finance, stated, "Amid ongoing uncertainties regarding interest rate cuts by major countries and the possibility of increased volatility due to developments in the Middle East conflict, we will respond with vigilance and closely cooperate with relevant agencies."

On the 2nd, Deputy Prime Minister Choi held an 'Emergency Macroeconomic and Financial Meeting' via video conference from Istanbul, Turkey, where he was attending the Korea-China-Japan ASEAN+3 Finance Ministers' Meeting and the Asian Development Bank (ADB) Annual Meeting. The meeting was attended by Kim Ju-hyun, Chairman of the Financial Services Commission, Lee Bok-hyun, Governor of the Financial Supervisory Service, and Yoo Sang-dae, Deputy Governor of the Bank of Korea. They reviewed the domestic and international impacts of the U.S. Federal Open Market Committee's (FOMC) decision to hold interest rates steady for the sixth consecutive time and discussed response strategies.

Earlier, Jerome Powell, Chair of the U.S. Federal Reserve (Fed), mentioned in a press conference regarding the possibility of resuming interest rate hikes that "the next policy move will not be a rate increase," placing more emphasis on holding or cutting rates rather than further hikes in monetary policy direction. The government assessed this by stating, "Concerns about additional hikes within the year have eased, but uncertainty about the timing of rate cuts remains."

The participants evaluated that although the domestic financial market has seen somewhat increased volatility in stock prices and exchange rates due to heightened tensions in the Middle East, it remains relatively stable with continued net inflows of foreign securities funds and ongoing credit spread reductions in the money market. They agreed to implement bold market stabilization measures against excessive market fluctuations that deviate from economic fundamentals.

They also decided to steadily promote structural improvements in the foreign exchange market, complete the institutional foundation such as opening integrated government bond accounts aiming for inclusion in the World Government Bond Index (WGBI) in September, and expand communication with major overseas investment institutions.

In addition, they plan to thoroughly manage potential risks such as real estate project financing (PF) and strengthen tailored financial support and structural policy responses for vulnerable sectors facing difficulties due to sustained high interest rates.

Regarding real estate PF, as demonstrated recently during the Taeyoung Construction workout process, under a consistent policy of a "orderly soft landing," they will ensure smooth funding supply to normal projects and promote restructuring for projects lacking viability.