[AJU NEWS CORP DB]
As widely expected, the U.S. Federal Reserve hiked interest rates for the first time in nearly a decade on Wednesday, and global stock markets rose as investors chose to take the rate hike as a mark of confidence in the world's largest economy.
South Korean policymakers said on Thursday the Federal Reserve's 25-basis-point increase is unlikely to cause a significant blow to the country's markets but said firm action would be taken if necessary.
"It is a relief that even despite the Fed rate hike, turbulence in global financial markets has not been large," said Vice Finance Minister Joo Hyung-hwan. Joo was chairing a meeting of policy-makers to discuss the outcome of the Fed policy meeting early on Thursday.
Joo said South Korea will be less vulnerable to outside shocks than emerging market economies because of the country's strong fundamentals such as massive foreign exchange reserves and its current account surplus.
He said uncertainties about the pace at which the Fed will continue to hike rates remain a risk for market movements ahead.
The South Korean government has said it would take firm action to stabilize markets if necessary.
Joo said the Seoul government will form a task force to change its existing capital controls by the end of June next year, a move aimed at mitigating short-term capital inflows.
On Wall Street, the Dow ended Wednesday with gains of 1.28 percent, while the S&P 500 rose 1.45 percent and the Nasdaq 1.52 percent.
World markets were buoyed by Fed Chair Janet Yellen's assurance that future tightening would be "gradual" and dependent on inflation finally moving higher as long forecasted.
The U.S. central bank's policy-setting committee raised the range of its benchmark interest rate by a quarter of a percentage point to between 0.25 percent and 0.50 percent, ending a lengthy debate about whether the economy was strong enough to withstand higher borrowing costs.
"With the economy performing well and expected to continue to do so, the committee judges that a modest increase in the federal funds rate is appropriate," Fed Chair Janet Yellen said in a press conference after the rate decision was announced. "The economic recovery has clearly come a long way."
The central bank made clear the rate hike was a tentative beginning to a "gradual" tightening cycle, and that in deciding its next move it would put a premium on monitoring inflation, which remains mired below target.
"The process is likely to proceed gradually," Yellen said, a hint that further hikes will be slow in coming.
By Alex Lee
reporter
Park Sae-jin
swatchsjp@ajunews.com
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