S. Korea vows 'preemptive' steps against market volatility after Fed's rate hike

SEOUL, May 6 (Yonhap) -- South Korea's finance ministry vowed Friday to seek preemptive measures, if needed, to tackle market volatility "in an aggressive and swift manner" following the U.S. central bank's half-point rate hike.

On Wednesday (U.S. time), the Federal Reserve raised its benchmark interest rates by a half-percentage point to curb the country's worst inflation in about four decades. The increase was the sharpest in 22 years.

Fed Chairman Jerome Powell said 50-basis point rate hikes "should be on the table at the next couple of meetings," though the committee is not actively considering even more aggressive rate hikes.

"As external uncertainties surrounding the South Korean economy have continued, concerns have increased over high volatility in South Korea's financial markets," First Vice Finance Minister Lee Eog-weon said, stressing the need for "preemptive responses."

"The government will closely monitor the market situation and risk factors with extra caution and implement stabilization measures actively and swiftly, if needed," he added.

Lee, however, noted the global uncertainties have had a limited impact on the South Korean economy up until now, citing the country's relatively resilient economic recovery and improved consumer sentiment in recent months.

South Korea's stock and currency markets got off to a weak start Friday. The benchmark stock price index had lost 1.2 percent, or 30.41 points, to trade at 2,647.16 as of 9:25 a.m., and the local currency was trading at 1,272 won per the U.S. dollar, down 5.7 won from Wednesday's close. The stock market closed Thursday for Children's Day holiday.

U.S. stocks plunged Thursday on renewed concerns over an economic slowdown due to high inflation and the Fed's monetary tightening, a sharp reversal from the previous day's large gains. The Dow Jones Industrial Average shed 3.12 percent, and the tech-heavy Nasdaq composite tumbled 4.99 percent.

In a separate meeting held Thursday, the Bank of Korea (BOK) said the results of the Fed's meeting largely matched market expectations and Powell's remarks appear to be regarded as "somewhat dovish."

But the BOK called for beefing up market monitoring, as surging inflation and the Fed's envisioned rate hikes are expected to boost uncertainties, along with prolonged market uncertainties caused by the war in Ukraine and the economic slowdown in China.

graceoh@yna.co.kr
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