Choi Sang-mok: "Domestic Financial and Foreign Exchange Markets, Short-term Volatility Increases... Calm Response Needed"

Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok Holds 'Macroeconomic and Financial Meeting'

Plans to Include Measures to Improve Foreign Exchange Supply and Demand in Next Year's Economic Policy Direction

Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok stated on the 19th, "The domestic financial and foreign exchange markets are expected to see increased short-term volatility," and emphasized the need for calm responses from market participants.

On this morning, Deputy Prime Minister Choi held a 'Macroeconomic and Financial Meeting' in collaboration with related agencies at the Korea Federation of Banks Hall to discuss the response direction following the U.S. Federal Open Market Committee (FOMC)'s decision to cut interest rates earlier that day.

The U.S. Federal Reserve held its regular FOMC meeting on the 17th and 18th (local time) and decided to lower the benchmark interest rate by 0.25 percentage points to 4.25-4.5% per annum. The Fed has consecutively lowered rates three times, following a 0.5 percentage point cut in September and a 0.25 percentage point cut in November.

Jerome Powell, Chairman of the U.S. Federal Reserve, stated at a press conference, "It was the best decision to achieve the Fed's two goals of maximizing employment and stabilizing prices," adding, "There was a closer call among Fed members, but it was the right decision." This suggests there was intense debate among the members regarding the rate cut.

Deputy Prime Minister Choi projected that short-term volatility in the domestic financial and foreign exchange markets would increase, stating, "Excessive leaning in one direction can lead to significant counter-reactions in the opposite direction in the future."

He further promised to operate a 24-hour financial and foreign exchange market monitoring system in cooperation with the Bank of Korea and to implement additional market stabilization measures swiftly and boldly if volatility becomes excessive.

The government plans to include measures to improve foreign exchange supply and demand, activate foreign exchange trading in extended hours, and improve trading infrastructure related to the World Government Bond Index (WGBI) in the '2025 Economic Policy Direction' to be announced at the end of this month.

Additionally, they plan to strengthen the financial capacity of financial companies by deferring the introduction of stress buffer capital accumulation regulations and to devise measures to alleviate financial burdens on small business owners and support low-income finance.

Deputy Prime Minister Choi stated, "We will continue to pursue value-up, resumption of short selling, and the advancement of the capital market."

Reporter Lee Kwang-sik bumeran@hankyung.com