Authorities to shore up support for vulnerable borrowers if repayment burden grows

Officials to closely monitor oil prices and global capital flows

Current-account surplus effects on market liquidity also under review

South Korea's economic and financial authorities said Thursday they would assess the impact of the US Federal Reserve's policy rate hike on domestic financial markets and stand ready to intervene if excessive stress emerges in the government bond market or repayment burdens on vulnerable borrowers worsen.

Deputy Prime Minister Koo Yun-cheol chairs an expanded macroeconomic and financial meeting (F4) on Thursday to review the impact of the US rate hike and the Middle East war on financial markets. Authorities assessed the domestic market impact of the Federal Reserve's rate increase as limited, but said they would implement market-stabilization measures if stress in the government bond market becomes excessive. From left: Bank of Korea Governor Shin Hyun-song, Financial Services Commission Chairman Lee Eok-won, Financial Supervisory Service Director General Lee Chan-jin and Deputy Prime Minister Koo. [Yonhap]
Deputy Prime Minister Koo Yun-cheol chairs an expanded macroeconomic and financial meeting (F4) on Thursday to review the impact of the US rate hike and the Middle East war on financial markets. Authorities assessed the domestic market impact of the Federal Reserve's rate increase as limited, but said they would implement market-stabilization measures if stress in the government bond market becomes excessive. From left: Bank of Korea Governor Shin Hyun-song, Financial Services Commission Chairman Lee Eok-won, Financial Supervisory Service Director General Lee Chan-jin and Deputy Prime Minister Koo. [Yonhap]

Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol convened an expanded macroeconomic and financial meeting, known as the F4, at Government Complex Seoul on Thursday with Bank of Korea Governor Shin Hyun-song, Financial Services Commission Chairman Lee Eok-won and Financial Supervisory Service Director General Lee Chan-jin. The meeting reviewed financial market developments following the Federal Open Market Committee's rate hike and assessed the impact of the Middle East war on financial and foreign exchange markets.

The authorities assessed that the Fed raised its policy rate amid persistently strong economic and employment conditions, elevated inflation and, more recently, rising international oil prices and growing geopolitical uncertainty. They said the rate increase had already been priced into markets and that overall financial market conditions remained stable, limiting the expected domestic impact.

Authorities said they would keep close watch on the Fed's reinforced commitment to price stability and the possibility of additional rate hikes before year-end. They also plan to monitor monetary policy decisions by the Bank of Japan and the Bank of England scheduled for this week, alongside international oil prices and global capital flows, coordinating with relevant agencies to assess spillover effects on domestic financial and foreign exchange markets.

Authorities also said they would address heightened volatility in the government bond market, driven by the US rate hike and other domestic and external developments. Expecting uncertainty to persist, they said they would closely track market conditions and implement stabilization measures if one-sided positioning becomes excessive.

The repayment burden on vulnerable borrowers from rising lending rates will also be monitored. Officials said they would remain alert to the risk of worsening debt-service pressures, push ahead with previously announced support measures for vulnerable borrowers and prepare supplementary steps if needed.

In addition, authorities said they would examine how changes in domestic and external economic conditions — including a current-account surplus — affect liquidity in the broader financial system. They plan to closely monitor related capital flows and liquidity conditions and continue assessing the impact on financial and asset markets.

Thursday's meeting was the last official F4 session Koo will attend as a member. He expressed gratitude to the heads and staff of the Bank of Korea, the Financial Services Commission, the Financial Supervisory Service and other relevant agencies for their joint efforts to maintain stability in financial and foreign exchange markets. He also urged the economic and financial team to continue responding swiftly and in a coordinated manner, building on the cooperative framework they have established.


y2k@heraldcorp.com