S.Korea - shares trade higher on FOMC decision to keep rate steady: ARIRANG NEWS

ARIRANG NEWS

Published on Sep 22, 2016

The U.S. Federal Reserve left its interest rates unchanged for the month of October... but did hint at a rate hike by the end of the year.

Following that news, shares climbed here in Korea. 

Hwang Ji-hye has the numbers. The U.S. Federal Reserve has decided to give its economy more room to knock out ashes from the last recession,... although that was more than seven years ago. 

The Fed kept its target rate steady on Wednesday at 0-point-2-5 percent to half-a-percent. But it did express confidence about the economy,... saying economic activity has picked up and the labor market has improved. Fed Chair Janet Yellen says, the key to its latest decision was risks stemming from lack of inflation. "We all agree that the economy is making progress, that we are close to an unemployment rate that is one that's sustainable in the longer run. We all agree we are undershooting our inflation goal, and that we want to make sure we stay on a course that raises that to 2 percent."

Given the mixed signals, the Fed was divided during this meeting,... with three of the ten voting monetary policymakers supporting a quarter-point rate hike.

The dissents,... analysts say, suggest a stronger shift towards monetary policy normalization before the year ends. "We would think that if they wanted to raise rates, they would want to have a press conference afterwards to talk about that in full length. That next press conference is in December. If you look at expected futures and the expectations of that, it was a roughly 50 percent prior to today's meeting. It's increased slightly since then."

On the back of the Fed's rate freeze coupled with BOJ's earlier decision to tweak its monetary easing policy,... Korean shares traded higher on Thursday, despite lurking uncertainties from Hanjin Shipping and Samsung's massive recall of its latest smartphones.

While all this gives Korea's central bank more leeway to dive deeper from its record-low key interest rate next month,... analysts say there are other issues in the mix the BOK will want to consider. "Both the Bank of Korea and the government share concerns about the household debt problem, and considering that the extra budget is being implemented this month, the central bank will want to take some time to gauge the impact, before it moves to cut rates."

Now what market watchers at home and abroad are keeping close tabs on is the U.S. presidential election in November... that's forecast to largely affect monetary decisions not only in America but also in other countries worldwide.