Uncertainty grows as Fed gives unclear rate signal

Bank of Korea Gov. Lee Ju-yeol said Wednesday that uncertainty remains for the Korean economy as it is difficult to predict when the U.S. Federal Reserve would start to raise interest rates.

In a meeting with economists and researchers, the country’s top monetary policymaker said the Fed calmed the global market by saying that it remained patient in raising rates.

At the same time, the U.S. central bank’s statement increased uncertainty, making it much more difficult to predict its monetary policy, Lee said.

“Even if the Federal Open Market Committee leaves out the word ‘patience’ in its next meeting in March, it does not mean that it will raise interest rates in June,” Lee said.

In a testimony before the U.S. Senate Banking Committee, Federal Reserve Board Chair Janet Yellen said the central bank was pleased with the economic recovery, but still falls short of its expectations.

Its signal for a rate hike could come at the next two FOMC meetings, indicating that the Fed could begin to tighten its monetary policy in June.

However, she said that it would remain patient until the labor market further improves and inflation rises toward its long-term target.

BOK Gov. Lee mentioned that Europe’s approval of Greece’s bailout extension proposal was good news for the global financial market, and that the Korean central bank would implement its policy while considering possible risks of Greece showing no progress.

By Park Hyong-ki (hkp@heraldcorp.com)