Market Review Meeting Held Following FOMC Decision
"Rate Cut in Line with Market Expectations... Uncertainty Remains"
On October 30, the Bank of Korea projected that the conclusion of the Korea-US tariff negotiations would have a positive impact on domestic financial and foreign exchange markets by alleviating uncertainty. The central bank noted that while the US Federal Reserve’s decision to cut its benchmark interest rate was in line with market expectations, uncertainty surrounding the future course of US monetary policy remains high.
Park Jongwoo, Deputy Governor of the Bank of Korea, made these remarks during a market situation review meeting held earlier that morning.
Deputy Governor Park stated, “The Fed’s rate cut decision overnight was in line with market expectations, but given the differences in opinion within the Fed and Chairman Jerome Powell’s cautious stance, uncertainty over the future path of US monetary policy remains high.”
Regarding the Korea-US tariff negotiations concluded the previous evening, he added, “The easing of uncertainty is expected to have a positive effect on domestic financial and foreign exchange markets.” However, he also noted, “There are numerous external risk factors, including uncertainty related to US-China trade negotiations and concerns over fiscal soundness in major economies. We will remain vigilant and closely monitor market conditions.”
On October 29 (local time), the Federal Open Market Committee (FOMC) decided at its regular meeting to lower the benchmark interest rate by 0.25 percentage points to a range of 3.75-4.00% per annum. The Fed also decided to halt quantitative tightening (QT) starting December 1.
However, internal differences of opinion emerged, with some members supporting a 0.5 percentage point cut and others favoring a rate hold. Chairman Powell also expressed caution regarding the possibility of a rate cut in December, stating, “No conclusion has been predetermined, and we will review the situation in a balanced manner based on incoming data.”
The Bank of Korea explained, “As a result, in the international financial markets, some expectations for the pace of rate cuts were reversed, leading to a significant rise in US Treasury yields and a strengthening of the US dollar, while stock prices remained flat.” In the US Treasury market, the two-year yield rose by 0.11 percentage points and the ten-year yield by 0.1 percentage points compared to the previous day. The US dollar also strengthened, with the dollar index (DXY) rising by 0.5%. In contrast, the major stock index S&P 500 closed flat.
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