ID :
203844
Sat, 08/27/2011 - 14:10
Auther :
Shortlink :
https://oananews.org//node/203844
The shortlink copeid
Fed chairman's speech to have limited impact on S. Korea: gov't
(ATTN: ADDS more info in paras 9-10, 14-17)
SEOUL, Aug. 27 (Yonhap) -- The chief of the Federal Reserve refrained from laying out further steps to boost the fragile U.S. economy, but it is likely to have a limited impact on South Korea's financial markets, officials said Saturday.
Fed Chairman Ben Bernanke on Friday stopped short of hinting at the third round of quantitative easing, known as QE3 in markets, to support the weakening economy at a conference in Jackson Hole, Wyoming. But the chairman said the central bank still has policy tools to stimulate the economy and will extend its September policy meeting to two days to mull its options.
Korean government officials said as his remarks have been widely expected, they would have little impact on the local financial markets.
"As many have already expected that Bernanke would not signal QE3, its impact will be limited on the local markets," a senior official at the finance ministry said.
"But the government will closely monitor the market as the local financial markets have undergone volatility following the U.S. credit downgrade."
The outlook for the global economy is growing dimmer as the first-ever U.S. credit rating downgrade and the eurozone sovereign strain have been raising concerns that the global economy may slide into a recession.
A slowing U.S. economy could throw cold water onto the Korean economy as its economic output heavily depends on exports. The South Korean financial markets have been also sensitive to foreign capital flows as the country has repeatedly experienced massive capital outflows whenever big external shocks crop up.
The Korean government said it is closely monitoring the local financial markets by running an emergency task force around the clock and is ready to take market stabilizing measures if necessary.
Market analysts said the Seoul stock market may get a short-term boost as the Jackson Hole meeting left the door open for further action down the road.
"Market-awaited measures did not emerge, but his speech gave comforts to investors somewhat as it raised expectations that potential stimulus measures would come in September," said Jang Hwa-tak, a senior analyst at Dongbu Securities Co. "In the short term, the local stock market is likely to gain ground as it has been largely swayed by news from the U.S."
The Jackson Hole meeting has been under a spotlight as market players had waited to see whether Bernanke would lay out powerful but controversial stimulus measures as he did at last year's meeting.
Last year, Bernanke said the central bank will conduct a second round of asset-buying programs worth $600 billion to boost its economy. But emerging countries like China have voiced criticism about the QE2 that cheap money has been flowing into those countries, raising risks of inflation and asset bubbles. Even some Fed policymakers raised questions on the effectiveness of the asset-buying scheme with the U.S. still struggling with high unemployment rates.
At present, there is growing expectation in the market that instead of QE3, the Fed is likely to opt to buy more long-term debt and sell short-term bonds in a bid to push down long-term interest rates without further bloating its balance sheet.
"The Fed's vow to keep its key rate near zero would curb a sharp rise in the short-term interest rate even if it sells short-term bonds. If the Fed buys longer-dated bonds with the proceeds, it would have an effect in putting downward pressure on long-term interest rates," said Kim Se-joong, a senior analyst at Shinyoung Securities Co.
"There is a high chance that the Fed is likely to take out such a card at the next month's meeting as it will be effective (in boosting the economy) when a country holds a large fiscal deficit.
The Fed pledged to keep its federal funds rate near zero at least through mid-2013 and said it is ready to take actions to support the weak economy.
Analysts also expect that the U.S. central bank may lower the interest rate that it pays banks on excess reserves parked at the Fed as the move could increase banks' room to lend more money.
SEOUL, Aug. 27 (Yonhap) -- The chief of the Federal Reserve refrained from laying out further steps to boost the fragile U.S. economy, but it is likely to have a limited impact on South Korea's financial markets, officials said Saturday.
Fed Chairman Ben Bernanke on Friday stopped short of hinting at the third round of quantitative easing, known as QE3 in markets, to support the weakening economy at a conference in Jackson Hole, Wyoming. But the chairman said the central bank still has policy tools to stimulate the economy and will extend its September policy meeting to two days to mull its options.
Korean government officials said as his remarks have been widely expected, they would have little impact on the local financial markets.
"As many have already expected that Bernanke would not signal QE3, its impact will be limited on the local markets," a senior official at the finance ministry said.
"But the government will closely monitor the market as the local financial markets have undergone volatility following the U.S. credit downgrade."
The outlook for the global economy is growing dimmer as the first-ever U.S. credit rating downgrade and the eurozone sovereign strain have been raising concerns that the global economy may slide into a recession.
A slowing U.S. economy could throw cold water onto the Korean economy as its economic output heavily depends on exports. The South Korean financial markets have been also sensitive to foreign capital flows as the country has repeatedly experienced massive capital outflows whenever big external shocks crop up.
The Korean government said it is closely monitoring the local financial markets by running an emergency task force around the clock and is ready to take market stabilizing measures if necessary.
Market analysts said the Seoul stock market may get a short-term boost as the Jackson Hole meeting left the door open for further action down the road.
"Market-awaited measures did not emerge, but his speech gave comforts to investors somewhat as it raised expectations that potential stimulus measures would come in September," said Jang Hwa-tak, a senior analyst at Dongbu Securities Co. "In the short term, the local stock market is likely to gain ground as it has been largely swayed by news from the U.S."
The Jackson Hole meeting has been under a spotlight as market players had waited to see whether Bernanke would lay out powerful but controversial stimulus measures as he did at last year's meeting.
Last year, Bernanke said the central bank will conduct a second round of asset-buying programs worth $600 billion to boost its economy. But emerging countries like China have voiced criticism about the QE2 that cheap money has been flowing into those countries, raising risks of inflation and asset bubbles. Even some Fed policymakers raised questions on the effectiveness of the asset-buying scheme with the U.S. still struggling with high unemployment rates.
At present, there is growing expectation in the market that instead of QE3, the Fed is likely to opt to buy more long-term debt and sell short-term bonds in a bid to push down long-term interest rates without further bloating its balance sheet.
"The Fed's vow to keep its key rate near zero would curb a sharp rise in the short-term interest rate even if it sells short-term bonds. If the Fed buys longer-dated bonds with the proceeds, it would have an effect in putting downward pressure on long-term interest rates," said Kim Se-joong, a senior analyst at Shinyoung Securities Co.
"There is a high chance that the Fed is likely to take out such a card at the next month's meeting as it will be effective (in boosting the economy) when a country holds a large fiscal deficit.
The Fed pledged to keep its federal funds rate near zero at least through mid-2013 and said it is ready to take actions to support the weak economy.
Analysts also expect that the U.S. central bank may lower the interest rate that it pays banks on excess reserves parked at the Fed as the move could increase banks' room to lend more money.
