The possibility of a U.S. interest rate hike, coupled with soaring international oil prices, is shaking global financial markets and raising alarms for the domestic economy. Financial authorities are convening an 'F4' meeting, which includes top economic and financial officials, to assess the potential impacts on the domestic financial market and real economy.
According to financial authorities on the 13th, the government plans to hold an expanded macroeconomic financial meeting on the 17th, the day the U.S. Federal Open Market Committee (FOMC) announces its interest rate decision.
The meeting will be chaired by the Deputy Prime Minister for Economic Affairs and will include the Chair of the Financial Services Commission, the Governor of the Bank of Korea, and the head of the Financial Supervisory Service, collectively known as the 'F4.' If Lee Hyung-il, the Deputy Prime Minister and Minister of Economy and Finance nominee, is confirmed on the 15th, this meeting will likely be his first platform for responding to the financial market after taking office.
Participants are expected to review the FOMC's results and trends in domestic and international financial markets, discussing how changes in U.S. monetary policy may affect domestic interest rates, exchange rates, and corporate financing conditions. They will also examine the implications of rising international oil prices on domestic inflation, trade balance, and the real economy.
The Financial Supervisory Service is also preparing to hold a financial situation review meeting on the 17th, chaired by its head, Lee Chan-jin, should the U.S. raise interest rates. The meeting will focus on corporate financing conditions and the interest burdens on vulnerable borrowers, with plans to devise response measures if necessary.
Recent stronger-than-expected inflation in the U.S. has led markets to weigh the likelihood of further tightening by the Federal Reserve. The Consumer Price Index (CPI) for August, released on the 11th, showed a 3.4% increase compared to the same month last year.
According to the Chicago Mercantile Exchange (CME) FedWatch, the probability of a rate hike by the Fed in September jumped from 72% the day before the inflation announcement to 87% afterward. The Fed had kept interest rates steady in June, but the dot plot indicated a retreat from expectations of rate cuts, with more analysts predicting either a hold or an increase.
Central banks in major economies are also continuing their tightening measures. The European Central Bank (ECB) raised its three key policy rates by 0.25 percentage points on the 10th, and the Bank of Japan is also expected to raise its benchmark rate this week. The Bank of Korea raised its benchmark rate by 0.25 percentage points to 3.00% on the 27th of last month.
As tensions between the U.S. and Iran escalate, international oil prices have surpassed $100 per barrel, raising concerns about simultaneous increases in inflation and interest rates. Rising oil prices could push up import and consumer prices in South Korea, which is heavily reliant on oil imports, and worsen the trade balance. Heightened inflationary pressures may also limit the Bank of Korea's monetary policy options.
Concerns about prolonged high interest rates are shaking the bond market as well. The yield on 10-year U.S. Treasury bonds briefly surpassed 5%, while the yield on South Korean three-year government bonds also exceeded 4% for the first time in nearly three years.
According to financial authorities on the 13th, the government plans to hold an expanded macroeconomic financial meeting on the 17th, the day the U.S. Federal Open Market Committee (FOMC) announces its interest rate decision.
The meeting will be chaired by the Deputy Prime Minister for Economic Affairs and will include the Chair of the Financial Services Commission, the Governor of the Bank of Korea, and the head of the Financial Supervisory Service, collectively known as the 'F4.' If Lee Hyung-il, the Deputy Prime Minister and Minister of Economy and Finance nominee, is confirmed on the 15th, this meeting will likely be his first platform for responding to the financial market after taking office.
Participants are expected to review the FOMC's results and trends in domestic and international financial markets, discussing how changes in U.S. monetary policy may affect domestic interest rates, exchange rates, and corporate financing conditions. They will also examine the implications of rising international oil prices on domestic inflation, trade balance, and the real economy.
The Financial Supervisory Service is also preparing to hold a financial situation review meeting on the 17th, chaired by its head, Lee Chan-jin, should the U.S. raise interest rates. The meeting will focus on corporate financing conditions and the interest burdens on vulnerable borrowers, with plans to devise response measures if necessary.
Recent stronger-than-expected inflation in the U.S. has led markets to weigh the likelihood of further tightening by the Federal Reserve. The Consumer Price Index (CPI) for August, released on the 11th, showed a 3.4% increase compared to the same month last year.
According to the Chicago Mercantile Exchange (CME) FedWatch, the probability of a rate hike by the Fed in September jumped from 72% the day before the inflation announcement to 87% afterward. The Fed had kept interest rates steady in June, but the dot plot indicated a retreat from expectations of rate cuts, with more analysts predicting either a hold or an increase.
Central banks in major economies are also continuing their tightening measures. The European Central Bank (ECB) raised its three key policy rates by 0.25 percentage points on the 10th, and the Bank of Japan is also expected to raise its benchmark rate this week. The Bank of Korea raised its benchmark rate by 0.25 percentage points to 3.00% on the 27th of last month.
As tensions between the U.S. and Iran escalate, international oil prices have surpassed $100 per barrel, raising concerns about simultaneous increases in inflation and interest rates. Rising oil prices could push up import and consumer prices in South Korea, which is heavily reliant on oil imports, and worsen the trade balance. Heightened inflationary pressures may also limit the Bank of Korea's monetary policy options.
Concerns about prolonged high interest rates are shaking the bond market as well. The yield on 10-year U.S. Treasury bonds briefly surpassed 5%, while the yield on South Korean three-year government bonds also exceeded 4% for the first time in nearly three years.
* This article has been translated by AI.
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