Fed chief Jerome Powell signals patience on rate hikes

As the U.S. Federal Reserve announced that it would slow down its interest rate hike this year, stock markets in major countries recovered on Friday (local time) that plunged due to concerns over Chinese economy slowing down and the Apple shock. The Bank of Korea, which raised the standard rate in November, has more leeway now.

“We will be patient as we watch to see how the economy evolves,” said Federal Reserve Chairman Jerome Powell at the American Economic Association's annual meeting in Atlanta on Friday. He also said he would not hesitate to change the Fed’s gradual run-off of its balance-sheet if it interferes with the Fed’s statutory goals.

Powell’s more dovish message at the interview made some project that the gradual interest rate hike over the past three years is over. On Friday, the Dow Jones Industrial Average increased to 23,433.16, 746.94 points, or 3.29 percent, up from the previous day due to his remarks and the strong employment numbers in December in the U.S. The S&P 500 Index increased by 3.43 percent and the Nasdaq Composite by 4.26 percent

If the Fed limits its interest rate hike to one time this year, the Bank of Korea would be able to keep the interest rate difference between South Korea and the U.S. within one percentage point. “The Bank of Korea now has less burden to raise the interest rate when it is not so easy to increase the rate due to concerns over household debts and sluggish economy in Korea,” said Park Ki-hyun, head of the research center at Yuanta Securities Korea.


Yong Park parky@donga.com · Yoo-Hyun Kang yhkang@donga.com