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Seoul remains vigilant against potential shock amid policy normalization

2018/06/15 10:07

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SEOUL, June 15 (Yonhap) -- South Korea's chief economic policymaker said Friday that the authorities will beef up market monitoring due to potentially volatile financial instability in some emerging markets that could increase amid the process of normalizing monetary policy in some major countries.

"There has been limited impact on South Korea, as the country is financially sound, holds ample foreign reserves and multiple currency swap deals," Finance Minister Kim Dong-yeon said in an economy-related ministers meeting. "But we can't rule out the possibility of such market developments having a ripple effect on our financial market as well."

   The minister vowed to take stern measures against potential capital outflow and redouble efforts to beef up the country's financial stability.

Earlier, the government said the authorities would prepare for a potential fallout as the Fed signals faster-than-expected rate hikes down the road.

As widely expected, the U.S. Fed raised its rate by a quarter of a percentage point to a range of between 1.75 percent and 2 percent this week and indicated that two more rate hikes may come this year, instead of the one hike that had been previously predicted.

Also, the European Central Bank (ECB) announced Thursday that it would end its massive asset purchase by the end of this year.

There have been concerns over capital outflow stemming from the gap between key South Korean and U.S. interest rates, but Kim said there is a slim chance of drastic capital outflow.

Currently, South Korea's base rate stands at 1.5 percent.

Meanwhile, the government said it will further review whether to join the fledgling Pacific trade pact after looking into its impact on the national economy and consulting with member states.

A year after U.S. President Donald Trump abandoned the Trans-Pacific Partnership, the 11 remaining member states early this year signed a revamped deal, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), in Chile.

The agreement, which aims to slash tariffs on goods to stimulate trade, will come into force after it is fully ratified by six of the 11 members, which include Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

The countries represent 13.5 percent of global gross domestic product, a total of $10 trillion.

The trade ministry said earlier the new pact would have a very limited impact on the national economy in the short term, considering the schedule of its implementation.

South Korea has been in preliminary negotiations to participate as an associate member in the Pacific Alliance trade bloc comprised of Mexico, Chile, Peru and Colombia.

Finance Minister Kim Dong-yeon speaks during an economy-related ministers meeting in Seoul, on June 15, 2018. (Yonhap) Finance Minister Kim Dong-yeon speaks during an economy-related ministers meeting in Seoul, on June 15, 2018. (Yonhap)

sam@yna.co.kr

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