US rate hike to have little impact on Korean market

South Korea's central bank chief said Thursday that the latest rate rise by the US Federal Reserve will have little impact on the local financial market, as the move was widely expected.

"The market has long anticipated the Fed's base rate increase this month," Bank of Korea Gov. Lee Ju-yeol told reporters. "The BOK is focused on the Fed's pace of rate rises next year and has kept its 2018 outlook unchanged."

He said the Fed remained less "hawkish" than expected despite an upgrade in the growth forecast.

The US central bank raised its key rate by a quarter percentage point to a range of 1.25-1.50 percent on Wednesday (US time), citing favorable economic conditions.

It suggested there would be three additional rate increases in 2018 and 2019, unchanged from its projections in September.

"The BOK will decide its monetary policy after carefully reviewing every aspect in South Korea, including the economy, consumer prices and financial stability risks," said Lee.

(Yonhap)

South Korea has the same key rate level as the United States, although the BOK raised the key rate to 1.5 percent last month for the first time in 6 1/2 years.

Meanwhile, the Financial Supervisory Service, the financial watchdog, said the South Korean financial market remains stable but officials will not let down their guard so they can deal swiftly with any further developments in the monetary policy sector.

The benchmark KOSPI gained 0.8 percent to 2,500.48 points as of 11:10 a.m., with the local currency rising 4.4 won to change hands at 1,086.3 won against the US dollar.

"The Fed is expected to keep increasing the rate next year with a further asset reduction," said Yoo Kwang-yeol, the first senior deputy governor at the FSS. "The FSS will be vigilant in a bid to minimize the adverse impact on the risky sectors like household debt, foreign outflows and FX liquidity." (Yonhap)