Korea to Actively Respond to Post-Election Market Volatility
(Bloomberg) -- South Korea said it will bolster its monitoring of financial markets and respond “actively” to ease any excessive volatility as policymakers brace for the implications of Donald Trump’s return to the White House.
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The government will expand its around-the-clock monitoring of global events ranging from the Mideast conflict to financial and foreign exchange markets as authorities step up their efforts to manage risks, Finance Minister Choi Sang-mok said Friday.
“Recently our financial and foreign exchange markets have experienced increased volatility due to the U.S. presidential election,” including the weakening of the won, Choi said. “There are uncertainties regarding global economic growth, inflation flows, and monetary policy stance of major economies due to geopolitical risks such as the Middle East and Ukraine, as well as strengthening protectionism in the future.”
Choi made the comments during a meeting with Bank of Korea Governor Rhee Chang-yong, Lee Bokhyun, head of the Financial Supervisory Service, and Kim Byoung-hwan, chairman of the Financial Services Commission.
It will be a week or two before the “dust settles” enough for authorities to determine what the outcome of the election means for monetary policy, Rhee said after the meeting ended.
During the meeting, Choi noted that financial markets remain largely calm as the impact from Trump’s win eases. Short-term interest rates, stock prices and bond yields remain stable, he added.
“In the event of excessive market volatility, we will actively respond in accordance with our situation-specific response plan,” Choi said.
Friday’s gathering came after the Federal Reserve voted unanimously Thursday to lower the federal funds rate to a range of 4.5% to 4.75%. The meeting marked Choi’s second rendezvous with economic and financial policymakers in Seoul since the US election resulted in a resounding victory for Trump.
The BOK is preparing for an interest-rate decision in late November, where economists generally expect authorities to hold settings steady after they conducted a policy pivot in October with a quarter-percentage-point cut to the benchmark rate.
The South Korean currency’s recent weakness against the dollar is a factor that makes the bank wary of easing settings too quickly.
A growing number of economists expect the BOK to accelerate its easing cycle if economic momentum slows next year. A softening export rally and rising geopolitical risks weigh on the outlook for the trade-reliant economy.
Rhee is set to depart Friday for Europe to attend Bank for International Settlements conferences in the Switzerland and visit the central bank in Germany. He said he’ll speak to policymakers during his upcoming trip to Europe for a better assessment of the impact from the US election.
(Updates with Bank of Korea governor’s comments)
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