The Bank of Korea announced on Thursday that uncertainty surrounding the monetary policy trajectory has increased following the Federal Reserve’s Federal Open Market Committee (FOMC) meeting. The central bank stated it would respond promptly through market stabilization measures if necessary.
Earlier that day, Deputy Governor Yoo Sang-dae led a task force meeting to assess market conditions in light of the Middle East situation and FOMC results. The group examined potential impacts on international financial markets and domestic financial and foreign exchange markets.
As expected, the Federal Reserve kept its policy rate unchanged at 3.50% to 3.75% during the FOMC meeting on March 17-18. While the Summary of Economic Projections (SEP) showed upward revisions to growth and inflation forecasts, the dot plot (policy rate projections) largely remained consistent with previous levels. The number of dissenting votes favoring a rate cut decreased from two in the previous meeting to one.
During the press conference, Fed Chair Jerome Powell expressed caution regarding the future interest rate path. He noted the uncertain impact of the Middle East situation on the U.S. economy and mentioned that various shocks are hindering progress on inflation.
In global financial markets, oil prices climbed again following Israel’s airstrikes on Iranian gas fields. The FOMC results were interpreted as hawkish, leading to stronger U.S. Treasury yields and dollar, while stock prices declined.
At the meeting, Deputy Governor Yoo stated that the uncertainty surrounding the Fed’s monetary policy path has intensified following the recent FOMC results. He also noted the persistence of external risk factors, including ongoing instability in the Middle East.
Yoo emphasized that given the continued high volatility in domestic financial and foreign exchange markets, the Bank of Korea will closely monitor developments in domestic and external risk factors and their financial and economic impacts. He assured that the bank would respond promptly through market stabilization measures if necessary.