Fed Changes Course Despite Trump’s Opposition… What Is the Ripple Effect on South Korea’s Economy?

[Anchor]

As the Federal Reserve has changed direction toward raising interest rates despite Donald Trump's opposition, a considerable impact is also expected for South Korea. A ripple effect could unfold across the exchange rate, domestic stock market, and interest rates.

Reporter Kim Beom-joo breaks down what we need to watch closely.

[Reporter]

Take a look at the movement of the won-dollar exchange rate early this morning (September 17).

The Fed raised interest rates at 3:00 AM, but the initial response was calm. It was something everyone had anticipated.

However, 30 minutes later, when Chair Warsh began speaking at the press conference, the rate started climbing sharply.

Hearing strong remarks carrying the nuance that he would bring inflation down quickly and not follow President Trump's wishes, a sentiment spread that U.S. interest rates could rise further, prompting people to think they should buy dollars.

For the time being, simply buying government bonds issued by the U.S. government guarantees a steady interest of around 5 percent. Some investors have increased, thinking it is safer to head to the U.S. rather than take risks and invest in Korea.

Then, what kind of direct impact will this have on our citizens?

The immediate concern hitting close to home is inflation.

When the dollar rises, the prices of imported goods—ranging from food items like flour and cooking oil that must be bought from overseas using dollars, to oil, steel, and so on—refuse to come down.

It becomes difficult for prices to stabilize.

This subsequently leads to concerns over loan interest rates.

With today's hike, the U.S. base rate is now 1 percentage point higher than ours.

If the U.S. raises rates further on its own from here, the possibility of capital outflow also increases.

In addition, because inflation must also be reined in, the pressure mounts for the Bank of Korea to eventually raise interest rates.

However, bank mortgage interest rates have already risen by 1 percentage point compared to the beginning of the year.

Consequently, for those carrying a debt of 300 million won, monthly interest has increased by 200,000 won, bringing total repayments including principal to 1.6 million won every month. If interest rates jump even further from here, people with heavy debts will find things increasingly difficult.

Looking further ahead, if the burden grows on U.S. artificial intelligence companies that have taken on massive debt to invest, the semiconductor boom could also be affected.

Like a butterfly effect, the Fed's decision across the Pacific can generate substantial repercussions for the daily lives of our citizens.

(Video editing: Cho Mu-hwan, Design: Seo Seung-hyun)
※ Please note: This article was translated by AI and may contain errors.