South Korea to take action if needed amid heightened market volatility
Senior Deputy Finance Minister Lee Eog-weon said there was no need for market participants to react sensitively to US inflation data because its consumer prices are considered to have temporarily increased in a context of economic recovery and a weak base effect.
“The government will intensify market surveillance and prepare to take timely measures to stabilize the financial market if necessary,” Lee said at a government meeting on macroeconomic conditions.
Global inflation fears intensified as consumer prices in the United States climbed 4.2% year-on-year in April, the fastest in 13 years.
South Korea’s key stock index traded lower on Thursday, heading lower for the third session in a row and building on overnight dips on Wall Street amid inflation fears.
The country’s benchmark stock index, the Kospi, fell 41.69 points, or 1.32%, to 3,119.97 at 2:23 p.m.
The Korean currency traded at 1,130.20 won to the US dollar, down 6.5 won from the previous day.
The country is also facing mounting inflationary pressures, with the consumer price index rising 2.3% year on year in April, the fastest annual gain in nearly four years.
Earlier today, Lee told a radio show that it was too early to say that the country’s economy was overheated enough to warrant a rate hike amid accelerating inflation.
He pointed out that inflation growth accelerated in March and April due in large part to a weak base effect last year when inflationary pressure remained subdued amid the pandemic.
Policymakers said inflation is likely to pick up in the second quarter mainly due to the lower base effect and high prices for agricultural and petroleum products.
Last month, the Bank of Korea (BOK) froze its key interest rate at a record 0.5% amid fears of a new wave of infections. The BOK aims to keep inflation at 2% over the medium term. (Yonhap)