BOK: "Fed Signals Possible Rate Hike to Tackle Inflation... Shift in Major Economies' Monetary Policy Becoming Visible"

Market Situation Review Meeting Following US FOMC Decision

Middle East Developments and Global Oil Trends After US-Iran Ceasefire,

Expansionary Fiscal Policies in Major Economies, AI Industry Concerns

"Remain Vigilant Against Potential Rise in Financial and FX Market Volatility"

"We assess that a shift in the monetary policy stance of major economies is becoming visible."

Sangdae Yoo, Deputy Governor of the Bank of Korea. Bank of Korea

On June 18, Sangdae Yoo, Deputy Governor of the Bank of Korea, stated at a market situation review meeting held at the Bank of Korea in Jung-gu, Seoul in the morning, following the results of the US Federal Open Market Committee (FOMC), "As the Federal Reserve (Fed) signaled the possibility of a rate hike in response to inflationary pressures at last night's FOMC meeting, we assess that a shift in the monetary policy stance of major economies is becoming visible, following rate hikes by the European Central Bank (ECB) and the Bank of Japan (BOJ)."

On June 17 (local time), the Fed unanimously decided to keep the benchmark interest rate unchanged at 3.50-3.75% at the FOMC meeting, in line with market expectations. However, with Chairman Kevin Warsh emphasizing the Fed's determination to stabilize prices at his first meeting, there is an outlook that US monetary policy will move in a more hawkish direction going forward. Chairman Warsh noted that US inflation has exceeded the target for more than five years, reiterating the Fed's commitment to price stability. In the Summary of Economic Projections (SEP), inflation forecasts for this year and next year were raised significantly, and the policy rate outlook was also revised upward. Among the 18 committee members who submitted dot plots, 9 projected that there would be an interest rate hike of at least 0.25 percentage points (25 basis points): 3 anticipated a 25bp increase, 5 a 50bp increase, and 1 a 75bp increase within the year.

Deputy Governor Yoo also pointed out that changes are expected in the Fed's future communication approach, which could increase uncertainties regarding the trajectory of Fed monetary policy. He emphasized, "Given the persistent domestic and external risk factors, such as the situation in the Middle East and international oil prices following the end of hostilities between the US and Iran, expansionary fiscal policies in major economies, and concerns related to the artificial intelligence (AI) industry, we will remain vigilant against the possibility of increased volatility in the financial and foreign exchange markets."

This content was produced with the assistance of AI translation services.