US Federal Reserve holds interest rates steady
The U.S. Federal Reserve left interest rates unchanged in its first meeting since President Donald Trump took office.
According to our Kim Jung-soo, the Fed also gave an optimistic outlook on the nation's economy, while also asserting it is well on track to tighten its monetary policy this year.
As widely expected, on Wednesday the Fed kept its benchmark rate unchanged... in a range from half a percent to three quarters of a percent, and said its outlook for the U.S. economy remains positive.
The Fed had raised its benchmark rate for just the second time in a decade back in December, with the Fed hinting at two or three rate hikes to come this year.
In its statement Wednesday, the central bank said measures of consumer and business sentiment have improved, and pointed out that the U.S. unemployment rate, at four-point-seven percent, was still near its recent low.
But the Fed also said that in the medium term, it still expects inflation to rise to its target of two percent, signalling that a rate hike could be on the way. Pundits say the next rise could be delayed because of uncertainty about the details and timing of
President Donald Trump's economic plans, most of which are expected to fuel inflation.
Experts in Korea were not surprised by the Fed's announcement either.
But they say the Korean government, as well as the Bank of Korea, must use this opportunity to prepare for future hikes, by strengthening the nation's foreign-exchange reserves. "The news of the Fed keeping its interest rate hike steady has been expected for a while, so it shouldn't result in any drastic changes in Korea or anywhere else.
But the Korean government must use this valuable window of time to prepare for the rate hikes to come, and try to mitigate any damage caused by President Trump's economic policies. A possible hike in the U.S. could prompt the BOK to raise its own rates, which could worsen Korea's household debt situation."
The Bank of Korea last month kept its benchmark rate steady at 1-and-a-quarter percent for the 7th straight month, explaining that it plans to stick with its current monetary easing policy to support growth, while also saying that it is fully prepared for increased volatility in the foreign currency markets.