Korea to take market-stabilizing steps if needed: official
Trader John Bishop works on the trading floor, Jan. 26, in this photo provided by the New York Stock Exchange. AP-Yonhap
The government plans to take measures to stabilize the country's financial market when needed, a senior official said, after the Federal Reserve signaled a rate hike in March to tame inflation.
The finance ministry assessed the Fed's monetary policy stance as hawkish, but it said the outcome of the U.S. central bank's latest rate-setting meeting is expected to have a limited impact on the Korean market.
Fed chief Jerome Powell said Wednesday (local time) that it has "quite a bit of room" to hike the federal funds rate to fight inflation after the Fed left the rate unchanged near zero at its two-day policy meeting.
The Fed is also expected to end its bond-buying pandemic-stimulus program in March and later launch the reduction of its asset holdings.
"The global financial market showed limited volatility overnight and Korea's economic fundamentals remain sound," First Vice Finance Minister Lee Eog-weon said at a government meeting on the financial market.
He said the government will keep close tabs on the market situation at home and abroad as there is high uncertainty about the pace of the U.S. monetary tightening and global inflation risks.
"If needed, the government will seek policy coordination with the Bank of Korea (BOK) to launch market-stabilizing measures in a timely manner, including the central bank's purchase of Treasury bonds," Lee said.
Korea's key stock index traded lower Thursday, sliding for the fourth straight day as investors digested the results of the Fed meeting. The Korean currency fell against the U.S. dollar on the hawkish stance.
The KOSPI fell 12.43 points, or 0.46 percent, to 2,696.81 as of 9:28 a.m. The Korean currency was trading at 1,201.90 won to the greenback, down 4.20 won from the previous session.
Bond yields spiked in recent sessions due to the BOK's rate hikes and the government's proposal to create an additional extra budget of 14 trillion won ($11.6 billion).
Yields of the three-year government bonds fell Wednesday after they rose to a near 4-year high of 2.174 percent Tuesday.
Market interest rates could further rise as the BOK hinted at more rate increases in the coming months to fight inflation. On Jan. 14, the BOK raised the benchmark interest rate by a quarter of a percentage point to 1.25 percent, marking the third pandemic-era hike since August and November last year.
The Korean economy grew 4 percent in 2021 from a year earlier, its fastest growth in 11 years and rebounding from a 0.9 percent contraction in 2020, according to central bank data.
"The Korean economy has weathered the COVID-19 pandemic well, having regained the lost economic ground from the pandemic," the International Monetary Fund (IMF) said in a release after its annual consultation with Korea.
Korea's economic growth is projected to remain "robust" in 2022 and 2023 at 3 percent and 2.9 percent, respectively, "supported by a recovery in private consumption and continued strong export growth," the IMF said. (Yonhap)