Financial authorities say Fed's rate hike to have limited market impact

Seoul, September 17 (Yonhap) -- Financial authorities say the Federal Reserve's decision to raise its key interest rate for the first time in over three years is likely to have minimal effect on financial markets, as expectations surrounding the move were already priced in, officials said on Thursday. The assessment was discussed during a meeting chaired by Finance Minister Koo Yun-cheol, which included Bank of Korea Governor Shin Hyun-song, Financial Services Commission Chairman Lee Eog-weon, and Financial Supervisory Service Governor Lee Chan-jin.

The Federal Reserve's decision to increase the benchmark interest rate by a quarter percentage point, bringing the target range to 3.75-4.00 percent, came in its first hike since July 2023. The move was made amid persistent inflation, high oil prices, and concerns over geopolitical uncertainties. Financial authorities assessed that the Fed's decision to raise rates was driven by the strength of the U.S. economy, employment conditions, and the recent surge in oil prices.

They agreed that the rate hike would have a limited impact on financial markets, as the adjustment had already been accounted for in market prices. South Korea will continue to closely monitor domestic financial and foreign exchange markets, and the authorities agreed to implement market stabilization measures if necessary due to increased volatility in the government bond market caused by external factors, including the Federal Reserve's rate hike.