<Anchor> This is a
friendly economic time. Today (2nd), I will be with reporter Kim Hye-min. These days, if you look at the US stock market as well as Korea like this, you can see the expression “going wild”. It seems like it's shaking a lot, but it's probably because of the omicron mutation, right?
<Reporter>
These days, those who do domestic or foreign stocks will be very upset when they see the stock price. The repercussions of the Omicron mutant virus on the stock market are enormous.
The US stock market crashed for a while and then I wondered if it would recover again, but it is repeating a decline. The reason the stock market has become so volatile is that it has become difficult to predict which direction the economy will go in the future.
If this happens, attention will inevitably be directed to the Federal Open Market Commission, which drives the economy of the United States and, by extension, the world.
The US is currently in the tapering phase. There were predictions that interest rates would be raised around the summer of next year, when the tapering ends.
Here, 'tapering' means 'to taper off', and countries have released a lot of money to boost the economy, which has been stagnant due to COVID-19. It means to gradually harvest this so that there are no adverse effects on the economy.
<Anchor>
Reporter Kim, By the way, when uncertainty increases like the omicron mutation, the economy deteriorates, and then the financial authorities release money to stimulate the economy, and so on. However, the current situation in the US is that even if the omicron mutation spreads, the money will not be released and will be further reduced. Are you going in this direction?
<Reporter>
Until now, there was a high possibility of maintaining the existing direction. However, the current inflation situation is temporary, said Jerome Powell, chairman of the US Federal Reserve. You've heard this expression a lot. I've done it many times.
It meant that there was no need for an unreasonable and hasty rate hike, as the current inflation would not last long. However, Chairman Powell recently made an unexpected remark. Let's hear it for yourself.
[Jerome Powell/Chairman of the Federal Reserve: It is difficult to predict the persistence and effectiveness of supply constraints, but it appears that the factors driving inflation remain until next year.] You
are reversing what you have said that inflation is temporary
.
Inflation is rising further due to global supply chain problems, but he also admitted that he missed this.
<Anchor>
Then, rather than focusing on recovering the economy because of Omicron, I will focus more on catching inflation because prices are rising too much now. Can I understand this?
<Reporter>
That's right. "I will do everything I can to keep inflation from sticking," Powell said. Having said this, I'm going to wrap this up a few months earlier at the Federal Open Market Committee meeting in December. I also said that I would consider this.
The Fed is reducing the size of bonds it is currently buying at $120 billion per month. As I said earlier, this is tapering.
It has been gradually reduced by $15 billion per month, and the market will see that reduction will change to $30 billion in the future. This is how I make predictions.
It was originally expected that the tapering would be completed in June of next year, but if the scale of reduction becomes this large, the completion of the tapering will also be pushed to March next year.
After the tapering is over, the next step is a natural rate hike. The rate of interest rate hikes will also accelerate.
<Anchor> I was a
little confused, but I think I can understand better after hearing reporter Kim's explanation. Another question I am curious about is the possibility that the US will raise interest rates and that the timing of interest rate hikes is likely to happen sooner. Then, of course, it will affect Korea as well, right?
<Reporter>
This is the one you are most curious about. The US interest rate hike has a huge impact on the global economy.
If the U.S. raises the benchmark interest rate quickly, Wall Street investment banks usually reduce the proportion of assets invested in countries around the world, but they begin to recover capital invested in emerging markets first.
So, central banks in emerging markets need to raise interest rates faster than the US Federal Reserve to respond to inflation and prevent foreign capital outflows.
Korea has already started raising the base interest rate. It went up to 1% a while ago. This is the same context. In the future, the rate of interest rate hike in Korea would have been sucked up if it had been faster, but it is difficult to delay it.
There is, however, one exception.
If the omicron mutation is more lethal than expected, it will have a devastating blow to the real economy.
You will find yourself in a situation where you have to unwind again.