Korea to take measures to prevent market volatility after Fed's base point rate increase

Finance

Published: 28 Jul. 2022, 10:39

Korea to take measures to prevent market volatility after Fed's base point rate increase

Bank of Korea Gov. Rhee Chang-yong, far left, and Finance Minister Choo Kyung-ho, second from left, are shown at a meeting held to discuss the impact of the Fed’s 75 point basis rate increase on the domestic finance market in central Seoul on Thursday. [YONHAP]

Korea will take pre-emptive measures to prevent market volatility in the wake of the Fed’s 75 basis point rate increase Wednesday, Finance Minister Choo Kyung-ho announced.

The FOMC raised the federal funds rate by 75 basis points for the second consecutive time on Wednesday, putting the rate in a range of 2.25 to 2.5 percent. Korea’s rate is 2.25 percent.

The Fed’s decision “was in accordance with the market expectation” and its “impact on the domestic finance market is projected to be limited,” Choo said in a meeting with Bank of Korea Gov. Rhee Chang-yong in central Seoul on Thursday. The meeting was also attended by Financial Services Commission Chairman Kim Joo-hyun and Financial Supervisory Service Gov. Lee Bok-hyun.

Choo said there are concerns about capital outflow from Korea due to the rate reversal between Korea and the United States, but added that foreign capital flowed into Korea in the past three cases when the rates were reversed.

“The fundamentals of our economy, global events and appropriate responses are believed to play a more crucial role in capital inflow and outflow.”

Choo added that Korea will take pre-emptive measures to prevent volatility in the bond market, including the government’s Treasury buyback operations.

BY JIN MIN-JI [jin.minji@joongang.co.kr]