Economy

Bank of Korea Maintains Rate Amid Geopolitical Tensions

The Bank of Korea (BOK) has shown reduced concerns regarding the U.S. Federal Reserve’s decision to keep interest rates at their highest level in 22 years. This decision has contributed to alleviating some market anxieties amid ongoing global challenges, including the Israel-Hamas conflict. The BOK interprets Fed Chairman Jerome Powell’s remarks as a sign of a continued restrictive monetary policy aimed at achieving inflation targets.

The outcome of the Federal Open Market Committee (FOMC) meeting, which decided to maintain policy rates, was in line with market expectations and was regarded as "dovish" by the BOK. Deputy Governor Lee Sang-hyeong noted that apprehensions about further rate increases were somewhat eased by rising Treasury yields. However, he emphasized Powell’s commitment to sustaining a restrictive monetary policy to meet inflation objectives.

In light of heightened U.S. loan interest rates due to the unchanged federal rate and significant household debt, the BOK opted to keep its rate at 3.50 percent. One member of the Monetary Policy Board suggested the possibility of flexible adjustments given the surrounding uncertainties.

Both the BOK and the government have devised a contingency plan to stabilize the markets if necessary, preparing to respond amid geopolitical strains and an economic slowdown. They are closely monitoring the effects of prolonged restrictive monetary policies and global geopolitical developments on financial and foreign exchange markets.

Following these updates, South Korea’s Kospi and Kosdaq indices experienced gains on Thursday. The BOK’s decision to maintain its rate comes as Hana Bank observed that the Federal Reserve’s stance has helped soothe market concerns.

This article was generated with the support of AI and reviewed by an editor.

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