{"id":2206534,"date":"2024-09-20T08:00:01","date_gmt":"2024-09-19T23:00:01","guid":{"rendered":"https:\/\/koreapro.org\/?p=2206534"},"modified":"2024-09-19T14:26:50","modified_gmt":"2024-09-19T05:26:50","slug":"fed-cuts-interest-rates-by-0-5-narrowing-gap-with-south-korea","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2024\/09\/fed-cuts-interest-rates-by-0-5-narrowing-gap-with-south-korea\/","title":{"rendered":"Fed cuts interest rates by 0.5%, narrowing gap with South Korea"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">The U.S. Federal Reserve lowered its benchmark interest rate by <\/span><a href=\"https:\/\/www.federalreserve.gov\/newsevents\/pressreleases\/monetary20240918a.htm\"><span style=\"font-weight: 400;\">0.5 percentage points<\/span><\/a><span style=\"font-weight: 400;\"> to 4.75% to 5%, citing progress in reducing inflation. The Federal Open Market Committee noted that inflation is closer to its 2% goal but remains elevated. Job gains have slowed, and the unemployment rate has risen slightly but remains low. The Fed reaffirmed its commitment to managing both inflation and employment targets.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The Fed also emphasized that the economic outlook remains uncertain and will closely monitor labor market conditions, inflation and global developments. It indicated readiness to adjust policy if needed. The Fed stated it will also continue reducing its Treasury and mortgage-backed securities holdings.<\/span><\/p>\n<p><b>WHY IT MATTERS<\/b><\/p>\n<p><span style=\"font-weight: 400;\">South Korea\u2019s finance ministry <\/span><a href=\"https:\/\/www.moef.go.kr\/nw\/nes\/detailNesDtaView.do?searchBbsId1=MOSFBBS_000000000028&amp;searchNttId1=MOSF_000000000070674&amp;menuNo=4010100\"><span style=\"font-weight: 400;\">responded<\/span><\/a><span style=\"font-weight: 400;\"> to the Fed\u2019s rate cut by emphasizing the need for vigilance in managing potential financial market volatility. The ministry noted that the narrowing interest rate gap between the U.S. and South Korea could lead to exchange rate fluctuations, with a stronger won impacting export competitiveness.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">South Korea\u2019s <\/span><a href=\"https:\/\/www.bok.or.kr\/portal\/bbs\/B0000501\/view.do?nttId=10086830&amp;searchCnd=1&amp;searchKwd=&amp;depth2=200038&amp;depth3=201263&amp;date=&amp;sdate=&amp;edate=&amp;sort=1&amp;pageUnit=10&amp;depth=201263&amp;pageIndex=2&amp;programType=newsData&amp;menuNo=201264&amp;oldMenuNo=201263\"><span style=\"font-weight: 400;\">real GDP<\/span><\/a><span style=\"font-weight: 400;\"> decreased by 0.2% QoQ due to weak domestic consumption and the construction industry\u2019s prolonged sluggishness, but it grew 2.3% YoY due to robust exports, especially in the semiconductor sector. South Korea\u2019s central bank <\/span><a href=\"https:\/\/koreapro.org\/2024\/08\/south-koreas-central-bank-holds-rates-steady-for-13th-consecutive-time\/\"><span style=\"font-weight: 400;\">lowered<\/span><\/a><span style=\"font-weight: 400;\"> this year\u2019s economic growth forecast to 2.4% from 2.5% in August. Any weakening of the country\u2019s export sector\u2019s competitiveness could have a negative impact on South Korea\u2019s GDP. However, the Fed\u2019s move could ease inflationary pressures in South Korea by lowering the cost of energy imports.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Domestically, rising household debt remains a key concern. The Bank of Korea (BOK) <\/span><a href=\"https:\/\/www.bok.or.kr\/portal\/bbs\/B0000501\/view.do?nttId=10086496&amp;searchCnd=1&amp;searchKwd=&amp;depth2=200038&amp;depth3=201263&amp;date=&amp;sdate=&amp;edate=&amp;sort=1&amp;pageUnit=10&amp;depth=201263&amp;pageIndex=3&amp;programType=newsData&amp;menuNo=201264&amp;oldMenuNo=201263\"><span style=\"font-weight: 400;\">reported<\/span><\/a><span style=\"font-weight: 400;\"> last month that household debt increased by $10.3 billion (13.8 trillion won) in the second quarter, reaching a total of about $1.4 trillion (1,896 trillion won). Although inflation has moderated, as reflected by the country\u2019s <\/span><a href=\"https:\/\/kostat.go.kr\/board.es?mid=a10301010000&amp;bid=213&amp;act=view&amp;list_no=432533&amp;tag=&amp;nPage=1&amp;ref_bid=203,204,205,206,207,210,211,11109,11113,11814,213,215,214,11860,11695,216,218,219,220,10820,11815,11895,11816,208,245,222,223,225,226,227,228,229,230,11321,232,233,234,12029,10920,11469,11470,11817,236,237,11471,238,240,241,11865,243,244,11893,11898,12031,11825,246&amp;keyField=T&amp;keyWord=&amp;bodo_b_type=all\"><span style=\"font-weight: 400;\">consumer price index<\/span><\/a><span style=\"font-weight: 400;\">, which came to around 2%, concerns over household debt will likely give pause to any decision by the BOK to cut interest rates.<\/span><\/p>\n<div class=\"content-tags\"><a href=\"https:\/\/koreapro.org\/tag\/business-economy\/\"><span class=\"tag\">Business &amp; Economy<\/span><\/a><\/div>","protected":false},"excerpt":{"rendered":"<p>The U.S. Federal Reserve lowered its benchmark interest rate by 0.5 percentage points to 4.75% to 5%, citing progress in reducing inflation. The Federal Open Market Committee noted that inflation is closer to its 2% goal but remains elevated. Job gains have slowed, and the unemployment rate has risen slightly but remains low. The Fed [&hellip;]<\/p>\n","protected":false},"author":10407,"featured_media":2206535,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[30],"tags":[24],"class_list":["post-2206534","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-briefings","tag-business-economy"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Fed cuts interest rates by 0.5%, narrowing gap with South Korea - KOREA PRO<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/koreapro.org\/2024\/09\/fed-cuts-interest-rates-by-0-5-narrowing-gap-with-south-korea\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Fed cuts interest rates by 0.5%, narrowing gap with South Korea - KOREA PRO\" \/>\n<meta property=\"og:description\" content=\"The U.S. Federal Reserve lowered its benchmark interest rate by 0.5 percentage points to 4.75% to 5%, citing progress in reducing inflation. 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