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US Rate Hike Raises Concerns In Korea

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Bank of Korea (BOK) says that the bank is concerned about the uncertainty of market volatility caused by US rate hike. The Bank of Korea (BOK) Governor Lee Ju-yeol expressed these views on Tuesday, The Korea Times reports.

The already begun trade war between China and the US will have a considerable impact on the economy of the country although steps have been taken to ensure safety. “Let’s say trade friction between the world’s two super powers is a wildcard to watch,” Lee said according to the report.

South Korea has Asia’s fourth largest economy behind China, Japan, and India, and it is the 11th largest in the world. US Federal Bank’s rate hike will not result in a sudden stop of the economy but it is possible a selling spree might be caused as the economy goes on. “Investors worry the Federal Reserve (Fed) may shift rapidly in its rate policy. We’ve seen high volatility in emerging economies’ currency and stock markets. The bank will keep an eye on them,” He said.

In his speech at the BOK 68th anniversary Lee said, “But if   overseas risks, from the monetary policy normalizations in major   countries and strengthening protectionism for example, materialize   simultaneously we will be unable to accurately estimate their effects.   We will therefore have to watch even more carefully any changes in   these risks.” It confirms that the Bank of Korea has been preparing for all possible kinds of the economy might have to face if a trade war breaks out in any part of the world involving the heavyweights.

In Trump’s trade deal, Steel and aluminium from South Korea was reduced to 70% of what it imported earlier although they were not subjected to the 25% tariff increase which was introduced to others such as Canada, Mexico, and the EU. Vehicle export to South Korea was increased from 25000 to 50,000 in the deal. The two allies are not likely to take on each other amid the current political situation involving North Korea, but every possible scenario has been under the watchful eye of the Bank of Korea.

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