Finance minister vows caution over myriad of global uncertainties

Finance Minister Choi Sang-mok speaks during an emergency macroeconomic meeting in Seoul on Thursday. [YONHAP]

Korea’s finance minister pledged to stay vigilant on growing uncertainties in the country’s economy and financial markets as the timing of interest rate cuts in key countries remains uncertain.

“We will respond [to the market] with a particular caution as uncertainties on the timing and the gap of rate cuts in key countries are high,” said Finance Minister Choi Sang-mok in a meeting with chiefs of Bank of Korea, Financial Services Commission and Financial Supervisory Service in central Seoul on Thursday.

Choi’s remarks followed the U.S. Federal Reserve’s rate-setting meeting Wednesday, where it kept the federal funds rate at between 5.25 to 5.5 percent for a fourth consecutive meeting. Fed Chairman Jerome Powell said in the press conference that a rate cut in March is not likely, sending U.S. stocks tumbling.

Choi said Korea’s financial and foreign exchange market remains comparatively stable.

“But internal and external risks remain, like changes in the monetary policy of key countries and real estate project financing loans. The government and the Bank of Korea will put in the utmost effort to manage the weak spots.”

Choi added the need for Korea to fundamentally improve its system, as the undervaluation of the country’s securities continues despite the rapid growth of stock investors.

The market capitalization for Kospi grew 78 percent in 2023 compared to 2017. The number of stock investors soared 185 percent to 14.41 million in 2022 from 2017.

Choi noted the eradication of illegal short selling, improvement in the system related to treasury stocks and expanding tax incentives to regain investor trust.

Bank of Korea Senior Deputy Gov. Ryoo Sang-dai said the central bank will thoroughly monitor domestic financial and foreign exchange markets as market volatility could frequently expand depending on key economic indicators, which the Fed uses to inform its monetary policy.

“Based on the meeting today, I would tell you that I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting to identify March as the time to do that,” Powell said in the news conference. “But that’s to be seen.”

Powell also said in the conference that rate cuts would likely begin at some point this year.

CAPTION:
Finance Minister Choi Sang-mok speaks during an emergency macroeconomic meeting in Seoul on Feb. 1, 2024. [YONHAP]

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