Fed’s rate increase has partially resolved uncertainties: Finance Minister

Finance Minister Choo Kyung-ho speaks at a meeting held in central Seoul Thursday following the Federal Reserve’s announcement to raise the federal funds rate by a quarter percentage point. [NEWS1]

The Fed’s quarter percentage point rate increase has partially resolved economic uncertainties, according to local financial authorities.

The Fed is seen to have slowed the rate increase due to “a continued slowing of Personal Consumption Expenditure (PCE) for six months and the lowest figure reached in 15 months” in December, said Finance Minister Choo Kyung-ho at a meeting held in central Seoul on Thursday.

PCE reached 5.0 percent in December.

The Federal Reserve raised the federal funds rate by 0.25 percentage point to a range between 4.50 and 4.75 percent on Wednesday.

Federal Reserve Chair Jerome Powell’s remark that the economy’s disinflation had started has been interpreted by the market to have resolved uncertainties, Choo added.

“We can now say I think for the first time that the disinflationary process has started,” Powell told reporters in a news conference on Wednesday, adding he expects U.S. economic growth to be positive this year.

Choo added uncertainties remain in the domestic market, caused by sluggish exports and inflation that is expected to remain high for some time being.

Korea's inflation inched up in January to a three-month high at 5.2 percent.

Korea saw its largest trade deficit ever in January, reporting a minus $12.69 billion balance.

Kospi and Kosdaq jumped around 1.5 percent during trading Thursday and the won was up more than 1 percent to the dollar.

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