U.S. rate hike to have little impact on Korea: official

The U.S. Federal Reserve's decision to raise its interest rates for the first time in nine years will have little impact on South Korea, a senior government official said Thursday.

Chairing a macroeconomic and financial policy meeting in Seoul, Vice Finance Minister Joo Hyung-hwan said the decision to raise rates by 0.25 percentage point was roughly in line with market expectations.

The Federal Open Market Committee moved to raise the target range of the federal fund rate from 0 to 0.25 percent, to 0.25 to 0.50 percent.

He stressed since South Korea's fundamentals are solid, the country will be little affected by potential volatility that may pose problems to emerging economies.

"South Korea maintains a large current account surplus, has sufficient foreign reserves and strives for fiscal soundness that differentiates it from many other countries," the official said. He pointed out that the amount of foreign capital that left the country in the past month remained unchanged compared to the past.

Joo, however, said the FOMC's move, while anticipated, did not remove all market uncertainties.

"To guard against greater volatility, Seoul will beef up monitoring of market developments and be ready to implement contingency plans if the need arises," the vice minister said. He stressed that the contingency plan will be continuously updated and be implemented swiftly to deal with market jitters.

He also said the government will check the country's foreign currency liquidity so it will be in a good position to respond to emergency situations, and hold conference calls with foreign investors and leading credit rating agencies to keep them informed of South Korean conditions and what actions it is taking.

"A task force made up of various government agencies will be set up this week to systematically check the country's foreign currency situation," Joo said.

In the past, rate hikes by the Federal Reserve have led to outflows of capital in some emerging economies that raised overall volatility in the global financial sector, which hurt economic growth and trade.

The macroeconomic meeting, meanwhile, was attended by senior officials from the finance ministry, the Bank of Korea, the Financial Services Commission, the Financial Supervisory Service and the Korea Center for International Finance. (Yonhap)