On September 17, Deputy Prime Minister and Minister of Finance and Economy Koo Yun Cheol convened the Expanded Meeting on Macroeconomic and Financial Stability[1] at the Government Complex Seoul to review developments in global financial markets following the U.S. Federal Open Market Committee’s (FOMC) decision earlier today (Korea time) to raise interest rates, as well as the impact of the conflict in the Middle East on the financial and foreign exchange (FX) markets, and to discuss policy responses.

Participants noted that the U.S. Federal Reserve (Fed) raised its policy rate in light of resilient economic and labor market conditions, persistently elevated inflation, the recent rise in global oil prices, and heightened geopolitical uncertainty. They assessed the market impact of the rate hike to be limited, as the move had already been priced in and overall financial market conditions remained stable. Meanwhile, global oil prices and capital flows will be closely monitored, with particular attention to the Fed’s strengthened commitment to price stability, the possibility of further rate hikes later this year, and upcoming monetary policy decisions by the Bank of Japan (BOJ), the Bank of England (BOE), and other central banks this week. The impact of these developments on Korea’s financial and FX markets will also be reviewed in coordination with relevant authorities.

Participants noted that volatility in the government bond market has increased amid changes in domestic and external conditions, including the U.S. Fed’s recent policy rate hike. Given that such uncertainties at home and abroad are expected to persist, they agreed to closely monitor developments in the government bond market and stand ready to take necessary market stabilization measures in the event of excessive one-sided market movements.

The recent rise in lending rates was also reviewed, along with the potential impact of higher interest rates on the repayment burden of vulnerable borrowers. The previously announced support measures for vulnerable borrowers will be implemented as planned, with supplementary measures to be prepared if necessary.

Participants also reviewed the impact of changes in domestic and external economic conditions, including the recent current account surplus, on liquidity in the market. Related fund flows and liquidity conditions will be closely monitored, while their impact on financial and asset markets will continue to be assessed.

Deputy Prime Minister Koo expressed his appreciation to the heads and staff of relevant institutions, including the Bank of Korea, the Financial Services Commission, and the Financial Supervisory Service, for their joint efforts to maintain stability in the financial and FX markets. He also called on the economic and financial authorities to continue to respond swiftly and in a coordinated manner, building on the cooperation framework established thus far.

Please refer to the attached files.