Latest Global Business News

FOMC March meeting kicks off; rate hike widely expected

 
The U.S. Federal Reserve is around halfway through its two-day monetary policy meeting... where analysts are WIDELY expecting a rate increase to a range of zero-point-seven-five to one percent.
 
The question now is how many times the U.S. central bank will raise rates this year... and how the trend could impact monetary policy in Korea.
 
Hwang Ji-hye reports.
 
On the back of solid jobs and inflation figures,... it's almost certain now that the U.S. Federal Reserve will hike its benchmark interest rate at its March meeting,... which wraps up on Wednesday in Washington.
 
If the U.S. central bank does announce a rate increase, it will be just the third in ten years... after it raised it in December of last year to a range of half-a-percent to zero-point-seven-five percent.
 
At the time, it also predicted three more increases this year.
So now the attention is focused on whether the prediction will bear out.
 
"I think you're going to want to see guidance of no more than three rate hikes this year. I think the market will really embrace two rate hikes. I think some people want three, but considering we haven't had policies being made to take the economy further, two would really be celebrated."
 
But analysts say... if the Fed becomes more hawkish and tightens monetary policy in ways or to a degree the market hasn't yet priced in,... disruptions are inevitable.
 
rate hike looms
 
"If they do make a signal of a fourth rate hike this year -- including March, June, September and December -- then there would be some volatility and unexpected actions that the market players will take account to."
 
That kind of uncertainty points to why analysts expect Korea's central bank to keep its rate unchanged throughout the year,... despite being under pressure to lower rates to boost the still sluggish economy, which is further threatened by China's retaliatory actions against the THAAD.
 
They say the possibility of fiscal stimulus measures is stronger following Park Geun-hye's impeachment.
"Presidential hopefuls will lay out new agendas,... and with that... a robust stimulus package could come when the new administration kicks off."
 
Even with the stimulus, few analysts are optimistic about the potential for robust growth for Korea,... based on the nation's snowballing household debt problem and the lingering trade uncertainties sparked by the Trump administration in the U.S.
 

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