Government to Monitor FOMC Impact, Citing "Uncertainty in US Interest Rate Trajectory"

Shinhwa Yonhap News

The government has stated that, despite the U.S. Federal Open Market Committee (FOMC) decision to keep interest rates unchanged, uncertainty regarding the future path of interest rates may persist. The government announced it will closely monitor major countries' monetary policy trends and thoroughly respond to the potential impacts on the domestic economy.

On July 30, First Vice Minister Lee Hyungil, presiding over the Macro-Economic and Financial Meeting, instructed, "We will keep a close watch on external conditions such as major countries’ monetary policies, international oil prices, and global capital flows, and thoroughly assess trends in the international financial markets and their impact on both our domestic economy and financial markets."

Yoo Sangdae, Deputy Governor of the Bank of Korea; Kwon Daeyoung, Vice Chairman of the Financial Services Commission; and Hwang Seonoh, Deputy Governor of the Financial Supervisory Service for Capital Markets, attended the meeting. The discussions focused on global financial market trends following the FOMC’s decision to keep rates steady, as well as forex and financial market developments and response strategies in light of the Middle East conflict.

As expected by the market, the FOMC meeting held overnight left the policy rate unchanged at 3.50–3.75%. While the rate decision itself was in line with expectations, concerns arose in the market over a potentially slower response to inflation. As a result, the Dow Jones Index suffered its largest drop in 15 months, and the 30-year U.S. Treasury yield surged to 5.21%, the highest level since July 2007.

The participants noted that while the U.S. Federal Reserve has kept its policy rate unchanged, the U.S. economy remains on a solid trajectory and corporate capital expenditures, especially in areas related to artificial intelligence (AI), continue to grow strongly.

However, they cautioned, "With inflation still running high in the United States and Europe and instability in the Middle East, uncertainty over the future path of policy rates may persist. We will continue to keep a close watch on major countries’ monetary policies, international oil prices, and global capital flows, and thoroughly assess how international financial market trends might impact the domestic economy and financial markets moving forward."

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