The US, which is suffering from high inflation, has raised its key interest rate sharply again.
The Federal Reserve (Fed), the central bank of the United States, announced in a statement shortly after the regular meeting of the Federal Open Market Committee (FOMC) that it would raise its key interest rate by 0.75 percentage points.
As the inflation (inflation) phenomenon continued despite the steep interest rate hike, it took an unprecedented measure called a giant step four times in a row (a 0.75 percentage point increase in the base rate at a time).
As a result, the US benchmark interest rate, which is currently 3.00-3.25%, has risen to 3.75-4.00%.
As the upper end of the US base rate rises to 4.00%, the interest rate gap with Korea widens even more, raising concerns about damage to the Korean economy due to capital outflows.
Earlier, the Fed raised the benchmark interest rate by 0.25 percentage points in March, ending the era of zero interest rates maintained since the COVID-19 pandemic in March 2020.
Following a 0.5 percentage point increase in May, the benchmark interest rate was raised by 0.75 percentage points each in June, July and September to actively tackle inflation.
The 0.75 percentage point increase this time was expected by the market.
This is because the consumer price index (CPI) announced last month rose 8.2% from the same month of the previous year and 0.4% from the previous month, respectively, because there was a strong consensus that price stability is still urgent.
In particular, the core CPI in September, excluding energy and food, which has high volatility, rose 6.6% from the same month of the previous year and 0.6% from the previous month, recording the largest increase in 40 years.
In addition, the core personal consumption expenditure (PCE) price index, which the Fed considers the most accurate indicator of inflation, rose 5.1%, and the labor market continued to strengthen, adding to the need for tightening.
The Fed's action widened the interest rate gap between the US and Korea (3.00%) by 0.75 to 1.00 percentage points.
The difference in the base rate between the two countries increased to a maximum of 0.75 percentage points with the Fed's third giant step in September, but narrowed to 0.25 percentage points on the 12th of last month with the Big Step (a 0.50 percentage point increase in the base rate) of the Bank of Korea's Monetary Policy Committee. We lost, but again expanded to 1.00% points.
One percentage point is equivalent to the largest gap at the time of the nearest US-Korea interest rate inversion (March 2018-February 2020).
This means that foreign funds will flow out in pursuit of higher yields, and the won/dollar exchange rate will rise.
In particular, there is a risk that the weak won will increase the price of imported goods and encourage inflation.
Accordingly, it is certain that the BOK will raise the base rate six times in a row on the 24th.
However, the extent of the increase is still flexible, and if the won/dollar exchange rate or inflation actually increases after the US giant step, or if foreign funds show a key sign of outflow, there is a possibility that the BOK will take two big steps in a row following October. It is expected to grow.