US Signals Rate Cut Pace Adjustment Next Year... Government Holds Emergency Cabinet Meeting Today [Morning Briefing]

US Signals Rate Cut Pace Adjustment Next Year... Government Holds Emergency Cabinet Meeting Today [Morning Briefing]

◆ US Cuts Rate by 0.25%P... "Pace Adjustment Next Year"

The Federal Reserve (Fed) of the United States adjusted the benchmark interest rate to 4.25~4.50%, 0.25 percentage points lower than before, on the 18th local time. As a result, the benchmark rate is now 1 percentage point lower than the peak rate of 5.5% that the Fed raised to curb inflation. Following a 0.5 percentage point cut in September, the Fed also lowered the benchmark rate by 0.25 percentage points in November. However, while the Fed had anticipated four rate cuts next year in September, it now suggests only two, indicating a pace adjustment in rate cuts. This decision is being evaluated as a hawkish rate cut.

◆ New York Stock Exchange Plummets as Fed Signals Rate Cut Pace Adjustment

On the night of the 18th local time, the New York Stock Exchange plummeted as the Federal Reserve (Fed) indicated a slowdown in the pace of rate cuts. The Dow Jones continued its downward trend for 10 consecutive trading days, marking the longest bearish streak in 50 years. On this day, the Dow Jones Industrial Average closed at 42,326.87, down 1,123.03 points (-2.58%) from the previous session. The Dow Jones recorded its longest bearish streak since 1974, when it fell for 11 consecutive trading days. The decline was the largest in four months since August 5 (-2.6%). The Standard & Poor's (S&P) 500 index fell 178.45 points (-2.95%) to 5,872.16, and the tech-heavy Nasdaq index dropped 716.37 points (-3.56%) to 19,392.69.

◆ US Treasury 10-Year Yield Hits Six-Month High on Rate Cut Pace Adjustment

As the Federal Reserve (Fed) announced on the 18th local time that it would slowly lower rates starting next year, US Treasury yields surged to a six-month high. According to the electronic trading platform Tradeweb, the yield on the 10-year US Treasury note rose 11 basis points (1bp = 0.01%) to 4.51% as of 3:35 PM, compared to the close of the New York Stock Exchange the previous day. This is the highest level in six months since early June. In its revised economic outlook released that day, the Fed projected the benchmark rate (median) at the end of next year to be 3.9%, 0.5 percentage points higher than the September forecast of 3.4%.

◆ Government Holds Emergency Cabinet Meeting This Morning... Likely to Discuss Veto on Controversial Bills

Acting President and Prime Minister Han Duk-soo will preside over an emergency cabinet meeting at 10 AM on the 19th at the Government Complex Seoul. The government is expected to review a re-deliberation request for six controversial bills: the National Assembly Act, the National Assembly Testimony and Appraisal Act, the Grain Management Act, the Agricultural and Fishery Products Distribution and Price Stabilization Act, the Agricultural and Fishery Disaster Countermeasures Act, and the Agricultural and Fishery Disaster Insurance Act. It is reported that the government is leaning towards exercising the re-deliberation right (veto) on these bills, which it has opposed. These controversial bills were passed by the opposition-led National Assembly on the 28th of last month. The deadline for exercising the re-deliberation right on these six bills is the 21st. Acting President Han will preside over a meeting of ministers on current state affairs after the emergency cabinet meeting. In the afternoon, he is scheduled to receive a briefing from National Security Office Director Shin Won-sik.

◆ Cold Snap with Temperatures Around -10 Degrees on the Way to Work

On Thursday the 19th, temperatures will be around -10 degrees Celsius in the central inland, eastern North Jeolla, and inland North Gyeongsang regions, making it very cold. Other areas will also be very cold with temperatures around -5 degrees Celsius, and strong winds will make it feel even colder. Morning temperatures will be slightly lower than usual but will gradually rise to be similar to the average from the afternoon. The highest daytime temperatures are forecasted to be between 3 and 10 degrees Celsius. The whole country will be mostly clear, but Jeju Island will have occasional clouds. Ulleungdo and Dokdo will receive 1 to 5 cm of snow and less than 5 mm of rain. Fine dust levels are expected to be 'good' to 'moderate' nationwide. However, Seoul and Sejong may experience 'poor' levels temporarily at night due to the accumulation of domestically generated fine dust caused by atmospheric stagnation. The east coast, Gangwon mountains, northeastern Gyeongsangbuk-do mountains, parts of the metropolitan area, and Gyeongnam region, where dry weather warnings have been issued, will experience very dry conditions.

Sujin Choi, Hankook Ilbo reporter naive@hankyung.com