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The heads of fiscal, monetary and financial authorities said today (16th) that the US Federal Reserve (Fed) Federal Open Market Committee (FOMC) has decided to raise the key interest rate by 0.75%, to minimize the impact on the financial and foreign exchange markets.
The leaders also diagnosed the recent economic situation as a 'complex crisis' and agreed that price stability was the most urgent issue.
Deputy Prime Minister and Minister of Strategy and Finance Choo Kyung-ho, Bank of Korea Governor Lee Chang-yong, Financial Services Commission Vice Chairman Kim So-young, Financial Supervisory Service Chairman Lee Bok-hyeon, and Presidential Office Chief Economic Affairs Officer Choi Sang-mok held an emergency macroeconomic and financial meeting this morning at the Seoul Bank Hall to share their awareness of the economic situation and take countermeasures discussed.
It is the first time in four months that the heads of fiscal, monetary and financial authorities have held a macroeconomic and financial conference, and it is the first time under a new government.
After the meeting, Deputy Prime Minister Chu said, "The current economic situation is a complex crisis and difficulties will continue for a considerable period of time as the Ukrainian crisis and supply chain disruptions overlap with a large Fed rate hike, [the attendees] shared the view." said.
Regarding the market situation after the FOMC result, he said, "The US financial market showed a rather stable appearance according to the evaluation that today's measures were at a level that was in line with the original expectations." “There is still concern that volatility will increase,” he added.
Deputy Prime Minister Choo
“Furthermore, we have decided to actively cooperate and respond jointly in three major directions to overcome the complex crisis,” he said.
First, he predicted an all-out response, saying that he had gathered a common perception that "inflation stability is the most urgent issue."
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Deputy Prime Minister Choo emphasized, "We will strengthen various efforts to respond to inflation, such as reducing the cost burden on the supply side, and preventing the spread of expected inflation, along with monetary policy that focuses more on inflation."
Regarding the financial and foreign exchange markets, he said, "As uncertainty has risen, we will strengthen our joint response efforts to prevent the spread of anxiety."
Deputy Prime Minister Chu explained, "In the case of the foreign exchange market, we will strive to avoid aggravating the phenomenon of concentration due to psychological overreaction while maintaining a special sense of vigilance against excessive volatility of the won."
"In the bond market, if the market reacts excessively, we will push ahead with the government's emergency buyback and the BOK's simple purchase of government bonds at an appropriate time," he added.
Regarding the management of potential risk factors such as the soundness of financial institutions, he said, "We will do our best to prevent systemic risks in advance by intensively examining the weak link between the soundness and liquidity of financial companies and the financial industry."
"From now on, the Ministry of Strategy and Finance, the central bank, the Financial Services Commission, and the Financial Supervisory Service will cooperate and respond jointly to minimize shocks in the financial and foreign exchange markets and do our best to overcome the crisis," said Deputy Prime Minister Choo.
When asked if there is a possibility that the Bank of Korea also has a big step (a 0.50 percentage point increase in interest rates), Governor Lee said, "The next Monetary Policy Committee (Monetary Policy Committee) meeting is three to four weeks away, and many changes may occur in the meantime."
Regarding the increase in households' interest burden due to interest rate hikes, Governor Lee said, "We plan to continue discussing with relevant institutions in the future to devise appropriate countermeasures as various financial market volatility is emerging."
(Photo = Yonhap News)