On August 1, Deputy Prime Minister Choi Sang-mok held a Meeting on Macroeconomic and Financial Stability to assess the impact of the decision by the U.S.’s Federal Open Market Committee (FOMC) to leave interest rates unchanged on domestic and international financial markets and to discuss response measures.
The following are key messages of DPM Choi’s remarks.
[Major Decisions of the FOMC]
The U.S. Federal Reserve (Fed) decided to hold the benchmark rate steady (a range of 5.25%-5.5%) for the eighth consecutive time. In its statement, the Fed reiterated its stance that it may not be appropriate to consider rate cuts until it has gained greater confidence in achieving the inflation target.
However, the Fed Chair Jerome Powell mentioned in the press conference that “if we get the data that we hope we get, a reduction of policy rate could be on the table at the September meeting”, leaving open the possibility of a shift in monetary policy.
Early morning today, the global financial markets interpreted the FOMC’s decision as somewhat dovish, largely remaining steady.
However, given the ongoing uncertainty regarding the timing and extent of interest rate cuts by major economies, the government will respond with heightened vigilance and in coordination with relevant institutions.
[Government’s policy directions]
Recently, the domestic financial market appears to be relatively stable.
Stock prices have remained steady due to continued foreign buying, and the money market is functioning smoothly with the successful issuance of corporate bonds. However, in light of significant uncertainties such as the resurgence of geopolitical tensions in the Middle East and the U.S. presidential election, the government will closely monitor these developments and respond promptly according to contingency plans as necessary.
In addition, much effort will be made to meticulously manage risk factors such as household debt and real estate project financing (PF).
First and foremost, the government will firmly maintain downward stabilization in household debt. The second stage of the Stress Debt Service Ratio (DSR) will be implemented as scheduled from September. Furthermore, the government will improve the interest rate determination system for housing policy finance, which has recently shown rapid growth, in a manner that may not cause harm to homebuyers.
Second, an orderly soft landing for real estate PF will be constantly pushed forward. Since the announcement of the measures in May, real estate PF has been progressing towards an orderly soft landing within a predictable and manageable scope. The supervisory authorities received the initial project viability results from financial institutions in early July and are expected to finalize follow-up action plans by the end of August.
Finally, regarding the WeMakePrice and TMON payout delays, the previously announced support measures totaling more than 560 billion won will be swiftly implemented to minimize the damage to consumers and sellers; further liquidity support measures will be prepared if necessary. Institutional improvements will soon be established as well after reviewing the adequacy of the Electronic Commerce Act and the Electronic Financial Transactions Act.
Please refer to the attached files.
