Fed maintains interest rates, Korea cautious of potential market volatility

The Bank of Korea stated on Thursday that, with the U.S. Federal Reserve maintaining interest rates between 5.25 per cent and 5.50 per cent for the sixth consecutive meeting, market reaction suggested a general perception of the Fed’s stance as “dovish.” As the Fed hinted at postponing rate cuts for the year, the likelihood of another rate freeze later in the month heightened.

The Bank of Korea expects that the Federal Reserve will maintain the current target interest rate for an extended period and continue monitoring incoming economic data to determine the timing and frequency of potential rate cuts.

Domestically, South Korea’s Finance Ministry has assured that the overall market outlook remains stable. However, the ministry has vowed to remain vigilant for possible market volatility following the Federal Reserve’s upcoming May meeting.

On Thursday, the Ministry of Economy and Finance convened an emergency meeting on macroeconomic issues. The meeting was chaired by Deputy Prime Minister and Economy Minister Choi Sang-mok, who is currently visiting Turkey ahead of the upcoming ASEAN+3 Finance and Central Bank Deputies’ Meeting in Tbilisi, Georgia.

While the details of the emergency meeting were not disclosed, the ministry’s proactive stance suggests a readiness to respond to potential market fluctuations in the wake of the Federal Reserve’s monetary policy decisions and global economic developments.

The ministry evaluated the current short-term global market as relatively stable. However, it acknowledged the potential for increased volatility, especially considering uncertainties surrounding rate-cut decisions in major economies and risks in the Middle East. The ministry emphasized its commitment to closely collaborating with relevant government agencies to address these challenges.