South Korean authorities immediately went into alert mode after the U.S. Federal Reserve delivered another quarter-point hike to its rate target to place interest rates slightly higher than Korea’s while markets took the much-anticipated change in stride.

In line with expectations, the U.S. central bank on Wednesday (local time) pushed up the fed fund rate target to 1.50 percent to 1.75 percent in the first policy meeting chaired by new chief Jerome Powell.

“The action is in line with expectations. The markets won’t be affected that much. But we will employ all possible policy tools should they turn unsettled,” said Bank of Korea Governor Lee Ju-yeol Thursday.

Asked whether the BOK will take a synchronized action in near meetings in April or May, he said “there are many factors to consider. We will study first quarter data and rate movements in our policy meeting.”

Lee in the legislative confirmation hearing upon his reappointment to a second term on Wednesday said the BOK will be prudent in delivering additional increases following the first hike in more than six years in November to put the benchmark rate at 1.50 percent.

He indicated one or two increases at the most, saying the scale still would put rates accommodative of growth.

Fiscal and financial authorities also held emergency meetings.

The Financial Supervisory Service (FSS) asked financial institutions to check possible risk factors affected by the U.S. rate increase and work hard to minimize the negative impact.

They issued verbal reassurance, saying higher U.S. interests alone do not trigger capital outflow in the local market as foreign capitals are moved by various factors including the domestic economic situations and corporate earnings prospective.

Markets were pleased with Powell’s clever tweak to the monetary policy normalization timetable of his predecessor Janet Yellen. The median goal for this year was unchanged at three hikes instead of four, while next year’s was increased to three from earlier suggested two. Normalization in U.S. rates that were kept at near zero from late 2008 to October 2014 commenced in December 2015. The midpoint would be at 3.4 percent by 2020 under the timetable.

The yield of the three-year government bond was down 3.5 basis points to 2.256 and that of the five-year government bond fell 2.8 basis points to 2.484. The Korean Composite Stock Price Index finished Thursday up 0.44 percent at 2,496.02.

By Yoon Won-sup and Choi Mira

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]