The Bank of Korea (BOK) assessed the market’s reaction to the Federal Reserve’s January Federal Open Market Committee (FOMC) meeting results on Thursday. While noting that the overall market response was stable, the BOK projected that uncertainty surrounding the future path of U.S. monetary policy would persist.
This assessment came after a Market Situation Review Meeting chaired by Deputy Governor Yoo Sang-dae at 8:00 a.m. that day. The meeting focused on international financial market trends and potential impacts on domestic financial and foreign exchange markets following the January FOMC results.
On Wednesday, the Fed maintained its policy interest rate at 3.50-3.75% during its first FOMC meeting of the year. Two members, Directors Stephen Miran and Christopher Waller, dissented, advocating for a 25 basis point cut. The Fed acknowledged ongoing inflation risks but noted improvements in growth and employment conditions.
Fed Chair Jerome Powell stated that while tension between employment and inflation persists, the risks of employment downturn and price increases have somewhat diminished. After three rate cuts, it’s time to assess incoming data. He added that it’s difficult to characterize current monetary policy as restrictive.
Powell’s comments suggest a cautious stance, not ruling out potential rate cuts this year but emphasizing that future policy decisions will be data-dependent, evaluated meeting by meeting.
In global financial markets, the FOMC’s impact was limited, with major asset prices remaining stable. U.S. Treasury yields for both 2-year and 10-year notes were unchanged. The S&P 500 index held steady, while the Nasdaq index rose 0.2%. The U.S. dollar index (DXY) edged up 0.1%.
The BOK maintains its vigilance regarding external uncertainties.
Deputy Governor Yoo remarked that despite the market’s overall stability following the FOMC announcement, uncertainties about future U.S. monetary policy are likely to persist, considering Chair Powell’s press conference and the timeline for appointing the next Fed chair.
He emphasized that given ongoing uncertainties related to U.S. trade policies, fiscal health concerns in major economies, and geopolitical risks, it will continue to closely monitor market conditions with heightened caution.