Bank of Korea: "Monetary policy leeway has increased…will decide while monitoring domestic factors"

The Bank of Korea assessed that its monetary policy leeway has increased due to the U.S. central bank (Fed) cutting its policy rate. It is understood to mean that concerns about capital outflows owing to the interest rate differential with the United States have eased.

On the 18th, Park Jong-woo, Deputy Governor of the Bank of Korea, held a 'market situation review meeting' and said, "With the Fed lowering rates again after nine months, the leeway to conduct monetary policy focusing on domestic economic, price, and financial stability conditions has increased."

However, he pointed to the divergence in Fed officials' policy rate outlooks as a factor that increases uncertainty. Park said, "The policy rate outlooks of Fed officials are considerably divided, so uncertainty related to the future path of U.S. monetary policy remains large," and added, "Given that external risk factors such as uncertainty related to future U.S. tariff policies and concerns about the fiscal soundness of major countries persist, we will maintain heightened vigilance and closely monitor market conditions."

At the FOMC regular meeting held on the 17th (local time), the Fed lowered the target range for the policy rate (benchmark rate) by 0.25 percentage points to an annual 4.00∼4.25%. This year's policy rate outlook was presented as an annual 3.50~3.75%, suggesting two additional cuts, but the outlooks were highly divided, with seven of the 19 members forecasting no further rate cuts.

Reporter Kang Jin-gyu josep@hankyung.com