First Vice Minister of Economy and Finance Lee Hyoung Il convened a Meeting on Macroeconomic and Financial Stability[1] (via conference call) with related institutions on December 11, to review the impacts on domestic and global financial and foreign exchange (FX) markets following the U.S. Federal Open Market Committee’s (FOMC) interest rate cut announced early this morning (KST) and to discuss future plans.

At the FOMC meeting overnight, the U.S. Federal Reserve (Fed) decided to lower the policy rate by 25 bp for the third consecutive time (upper bound at 3.75%). The Fed also revised down its inflation outlook while raising its growth forecast, and maintained its projection of one additional rate cut in 2026.

In the press conference, Chair Powell stated that a rate hike is not being considered at this point, and noted that the inflationary impact of tariffs is expected to ease from the second half of next year.

In the early morning, global financial markets assessed the latest rate cut as being in line with expectations. At the same time, they focused on the Fed’s revised outlook for lower inflation, which led to a decline in U.S. Treasury yields and a weakening of the dollar.

The participants shared the view that, while the U.S. is expected to continue its rate-cutting cycle, Japan is likely to raise its policy rate in the near future, indicating a divergence in major economies’ monetary policies amid heightened market uncertainty. They assessed that, as a result, global capital flows and the volatility of domestic and global markets – including stock prices, interest rates, and exchange rates – could increase due to the divergence in major economies’ monetary policies and shifts in interest-rate differentials.

Participants also concurred that, while the domestic stock market has remained generally stable in recent weeks, the rise in government bond yields and concerns over increased volatility in the FX market warrant close attention. They agreed on the need to strengthen market monitoring, keeping a close watch on major economies’ monetary policies and economic indicators. In response, VM Lee requested that the 24-hour joint monitoring system for financial and FX markets continue to operate without interruption and emphasized the need for timely actions, in close coordination with relevant agencies, when necessary.