SEOUL, June 26: Emerging market economies may be pushed to tighten monetary policy to ward off capital outflows sparked by the U.S. Federal Reserve’s plans to start winding down its massive stimulus program, South Korea’s central bank chief said on Wednesday.
‘Emerging market economies with open capital markets will be particularly vulnerable to such negative impacts on growth of global financial uncertainty,’ Bank of Korea Governor Kim Choong-soo said at an event in Seoul.
The comments came as South Korean markets recently plummeted to year-lows after the Fed signalled its plans to taper back its bond-buying programme amid signs that the U.S. Economy was improving.
The Korean won lost more than 2 percent against the dollar last week alone after the Fed’s announcement, spurring local authorities to intervene in the market to slow the won’s fall. Seoul shares also fell 3.5 percent on a weekly basis.
Kim added that global economic growth may be impeded by uncertainties stemming from the withdrawal of monetary stimulus and rising global interest rates.
The Bank of Korea lowered interest rates in a surprise move in May in its third rate cut since it started its easing cycle last July, and most analysts now see the central bank on hold until year-end.
(agencies)
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