(LEAD) S. Korea vows to enhance market monitoring over U.S.’ further rate hike possibility

SEOUL, – South Korea will beef up its monitoring of potential volatility in the financial and foreign exchange markets amid the possibility of the United States’ additional interest rate hikes and geopolitical risks, the finance ministry said Thursday.

On Wednesday (local time), the Federal Reserve kept its benchmark interest rate unchanged and Fed Chair Jerome Powell signaled an end of its monetary tightening cycle, while leaving the door open to further hikes to curb inflation.

The key rate was set at a range of 5.25 percent to 5.50 percent, the highest level since 2001.

“We cannot rule out the possibility of further rate hikes, as inflationary pressure remains high in the U.S. and major economies and uncertainties are high stemming from geopolitical risks. The government will be on high alert and will further beef up its monitoring of the market,” First Vice Finance Minister Kim Byoung-hwan said during a meeting on macroeconomics.

The meeting was attended by senior officials of relevant institutions, including the Bank of Korea and the Finance Services Commission.

The government will devise contingency plans according to various scenarios and swiftly implement measures when necessary to minimize the impact of global economic uncertainties on the domestic financial and foreign exchange markets, according to the ministry.

South Korean stocks surged nearly 2 percent to close at 2,343.12 on Thursday, as investors welcomed the Fed’s rate freeze, which met market expectations, and hoped for its dovish pivot.

The Bank of Korea (BOK) said the latest decision “has somewhat eased concerns” about additional rate hikes, though it is needed to note Powell’s call for maintaining restrictive monetary policy to stamp out inflation.

“There are multiple uncertain factors, such as high inflation, weak growth and prolonged aggressive monetary tightening moves in major economies, as well as the Israel-Hamas war. We will closely monitor their impact on the market,” the BOK’s Deputy Gov. Lee Sang-Hyeong said during a meeting to check market circumstances after the Fed’s announcement.

Last month, the BOK held its key interest rate steady at 3.5 percent for the sixth straight time.

Source: Yonhap News Agency