ECB's hike, Powell's remarks within expectations but volatility likely to mount amid global tightening: BOK

SEOUL, Sept. 13 (Yonhap) -- The recent rate hike decision by the European Central Bank (ECB) and the U.S. Federal Reserve chair's remarks on monetary policy were in line with expectations but worries over aggressive monetary tightening in major countries will likely heighten volatility in financial markets, Seoul's central bank said Tuesday.

From Friday to Monday, including the weekend, the South Korean markets were closed due to the Chuseok holiday during which the ECB hiked its rate by 0.75 percentage point and Fed Chair Jerome Powell reaffirmed his commitment to fighting inflation, suggesting that the U.S. central bank will continue its aggressive rate increases.

"Those moves were broadly within expectations and volatility remains limited in price variables of major countries," the Bank of Korea (BOK) said in a press release after holding a meeting to gauge the impact of the latest financial developments.

"Still, the Fed responds to still high inflation and the ECB is showing signs of accelerating its monetary tightening, while Japan's yen is fast weakening and the worries over China's economic slowdown are growing," it added. "Chances are high that volatility will mount not just in global financial markets but also in domestic financial and foreign exchange markets."

The BOK said the Fed will very likely deliver another 0.75 percentage-point rate increase in its meeting set for Sept. 20-21, highlighting the need to step up monitoring of its impact on the country's financial markets, including the possibility of capital outflows and the local currency's slide against the U.S. dollar.

kokobj@yna.co.kr
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