South Korea's central bank assured the market Thursday that it won't overreact to the latest US interest rate increase, saying it won't "mechanically" alter Seoul's monetary policy.
Jang Byung-wha, senior deputy governor of the Bank of Korea (BOK), stressed that the Fed's decision to increase the base rate by a quarter percentage point was widely anticipated.
"Concern is not big that the local financial market will become unstable or swings will expand," he told reporters after an emergency meeting held hours after the Fed's announcement. He pointed out Fed Chair Janet Yellen's statement signaling gradual rate hikes down the road.
"Some market participants were nervous about the possibility of the Fed raising the rate fast, but Yellen's remarks were not that hawkish," Jang said. His comments reflect a sense of relief among South Korea's policymakers, with only two additional hikes - probably in June and December - expected this year.
Jang said the Fed's rate increase won't lead to a "mechanical" response by the BOK to raise its own policy rate. "The US benchmark rate is an important reference index but our rate should be considered from the domestic perspective," he said. "That's because the real economy and financial situations at home are important."