Domestic market on mend according to financial authorities

Finance

Published: 15 Dec. 2022, 10:03

Domestic market on mend according to financial authorities

Finance Minister Choo Kyung-ho speaks at a meeting held with chiefs of the Bank of Korea, the Financial Services Commission and the Financial Supervisory Service in central Seoul on Thursday. [YONHAP]

The domestic financial market is starting to recover from the U.S. Fed’s slowing rate increase and the government’s market stabilization measures, said financial authorities Thursday.

Market uncertainties remain high, but it has started to recover based on the expectation that the Federal Reserve will slow the rate increase, said Finance Minister Choo Kyung-ho in a statement following the Fed’s decision to raise the rate by 50 basis points Wednesday.

“Yield for commercial paper fell for three days straight for the first time since early October, and the yield for corporate bonds is also stabilizing while the amount being issued is steadily increasing,” said Choo. He added that the won-dollar exchange rate has also stabilized.

The yield for commercial paper with 91-day maturity was 5.50 percent on Wednesday, compared to 5.54 percent last Friday. The won also recently fell below 1,300 won after peaking at 1,444.2 won on Oct. 25. The won is trading at around the 1,299 won-range Thursday.

The Fed slowed the rate increase from the three-quarter percentage point per meeting they had stuck with since June. Wednesday’s move brings the federal funds rate to between 4.25 and 4.5 percent, higher than the Bank of Korea’s 3.25 percent.

“I would say it’s our judgment today that we’re not in a sufficiently restrictive policy stance yet, which is why we say that we would expect that ongoing hikes will be appropriate,” said Fed Chairman Jerome Powell in a press conference following the rate announcement.

“The inflation data received so far in October and November show a welcome reduction in the pace of price increases, but it will take substantially more evidence to give confidence inflation is on a sustained downward path.”

U.S. inflation eased in November, climbing 7.1 percent from a year ago, down sharply from 7.7 percent in October.

Choo vowed to continue unfolding support measures to prevent a liquidity crunch along with other financial authorities.

The Bank of Korea announced last month it would buy up to 2.5 trillion won of repurchase agreements to help some financial institutions make their contributions to a market stabilization fund.

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