Source: Yonhap News
Announced on May 2nd, the Bank of Korea will actively respond through timely market stabilization measures in case of excessive volatility in the foreign exchange and financial markets, following the decision of the U.S. Federal Reserve (Fed) to keep the benchmark interest rate unchanged.
Deputy Governor Ryoo Sangdai chaired the Market Situation Review Meeting at the Bank of Korea. During this session, the team assessed the international financial market situation and its effects on domestic and foreign exchange markets.
The Fed maintained the policy rate at 5.25-5.50% during the FOMC meeting on May 1st (GMT).
The Bank of Korea noted that “despite the somewhat hawkish decision, U.S. Treasury yields dropped, the USD weakened, and stock prices displayed a mixed response. This was influenced by factors such as the larger-than-expected reduction in quantitative tightening and remarks from Chairman Powell.”
That day, U.S. Treasury yields for 2-year and 10-year bonds decreased by seven and five basis points, respectively. The dollar index fell by 0.5%.
The Dow Jones Industrial Average closed at 37,903.29, up 87.37 points (0.23%) from the previous trading day at the New York Stock Exchange (NYSE). The S&P 500 index, which focuses on large-cap stocks, ended at 5,018.39, down 17.30 points (0.34%). The tech-focused Nasdaq index finished at 15,605.48, down 52.34 points (0.33%) from the previous trading day.
Deputy Governor Ryoo stated, “At this FOMC, Chairman Powell of the Fed maintained a cautious stance, noting that the possibility of further interest rate hikes is low, but more time is needed to be confident in disinflation and interest rate cuts.” He added, “Therefore, the uncertainty related to the Fed’s future monetary policy still appears to be high.”
He emphasized, “In a situation where the uncertainty of monetary policy in major countries such as the U.S. is significant, we will continue scrutinizing the situation in the foreign exchange and financial markets with particular vigilance. Various external uncertainties, such as geopolitical risks in the Middle East, still exist.”
Deputy Governor Ryoo added, “In this process, if there is a risk of excessive volatility in the foreign exchange and financial markets due to the release of major economic indicators, we will actively respond through timely market stabilization measures.”
