On the morning of the 19th, the Bank of Korea held a market situation review meeting regarding the U.S. interest rate cut and stated that Federal Reserve Chairman Jerome Powell's cautious stance on the pace of future rate cuts during his press conference was somewhat hawkish (favoring monetary tightening) in the international financial markets.
The U.S. Federal Reserve (Fed) lowered the upper bound of the target range for the federal funds rate by 0.5 percentage points from 5.50% to 5.0% at the Federal Open Market Committee (FOMC) regular meeting held on the 18th (local time). This is the first U.S. interest rate cut since March 2020.
At the press conference, Powell responded to questions about the pace of future rate cuts by saying, "We make decisions at each meeting based on incoming data, the evolution of the economic outlook, and the balance of risks (to inflation and employment)," adding, "If deemed appropriate, we may proceed more slowly." Following Powell's press conference, U.S. Treasury yields rose, stock prices fell, and the U.S. dollar remained steady.
The Bank of Korea assessed that the U.S. interest rate cut would provide some leeway for future monetary policy operations. At the meeting, Bank of Korea Deputy Governor Yoo Sang-dae emphasized, "The pivot in U.S. monetary policy is beginning, which is expected to positively contribute to easing volatility in the foreign exchange market," and added, "The capacity to operate monetary policy focusing on domestic economic conditions, inflation, and financial stability has increased."
He further anticipated, "Monetary policies of major countries can also be differentiated according to each country's circumstances, and the volatility of price variables may expand depending on the developments of geopolitical risks such as the U.S. presidential election and the Middle East situation."
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