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Bank of Korea warns of more market turmoil to come as Fed signals more rate hikes


The Bank of Korea on Tuesday warned of “increasing volatility” as global markets brace for future rallies from the US Federal Reserve.

“There is a high chance of volatility increasing whenever the US Federal Reserve makes a policy decision on exchange rates and global foreign exchange and financial markets have to digest it,” said BOK Governor Rhee Chang. -yong, according to a text message from the central bank.

Rhee said Powell’s comments on the US central bank’s plan to continue raising interest rates in September were “not much different” from South Korea’s stance at the US central bank’s August meeting.

The Bank of Korea will not change its current monetary stance, but will “closely monitor the Fed’s decision and its impact at home and abroad,” Rhee said.

At Jackson Hole last week, Rhee told Reuters The BOK is unlikely to end its rate hike cycle any sooner than the Fed.

“We are now independent of the government, but we are not independent of the Fed,” Rhee told Reuters. “So if the Fed continues to raise rates, it will put downward pressure on our currency.” Commenting on the rate hike, Rhee said at the time: “Can we end it sooner – I don’t think so.”

Korean stocks saw a rebound on Tuesday, a day after the benchmark Kospi more than 2% off and you Han Quoc has been promoted hit its weakest level in more than 13 years on Monday.

First spending cut in 13 years

The South Korean government also announced on Tuesday that it will cut annual government spending for the first time in more than a decade.

The Ministry of Finance released its first budget proposal of 639 trillion won ($473 billion) for 2023 – 6% smaller than this year’s spending after two additional budgets and would mark the first annual reduction since 2010 if no additional budget is announced.

In a statement, finance The ministry said the nation was announcing a “complete shift” in its fiscal stance “from expansion to fiscal soundness.”



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