The U.S. Federal Reserve has decided to hike interest rates for the third time this year.
Now there's added pressure on South Korea's central bank to lift its own key rates... as the rate gap between the two countries has widened to the highest level in over ten years.
Kim Hyesung reports.
In a unanimous move Wednesday, the U.S. Federal Reserve raised its benchmark federal funds rate by a quarter percentage point to a range of two to two-and-a quarter percent... in the Fed's eighth rate hike since 2015.

"This action reflects the strength we see in the economy and is one more step in the process that we began almost three years ago of gradually returning interest rates to more normal levels."

The Fed forecasts the U.S. economy will grow three-point-one percent this year,... faster than the two-point-eight percent projection back in June,... adding it will continue to expand moderately for at least three more years.
With the latest increase, the rate gap between Korea and the U.S. has widened to 75 basis points.
Finance Minsiter Kim Dong-yeon and Bank of Korea governor Lee Ju-yeol said Thursday that the Fed's rate hike will likely have a limited impact on Korea's capital markets,...saying the pace of rate normalization is in line with expectations.
Korea's capital market has stayed relatively stable even after the Fed's rate hike in March that made the U.S. rate higher than Korea's for the first time in a decade, but the capital market risk is growing.

"Korea has strong economic fundamentals, like its current account surplus and record high FX reserves. But with the rate gap continuing to widen as the U.S. tightens its monetary policy, it could result in volatilty in emerging markets, and cause capital flight from Korea... as investors look for safer assets like U.S. bonds with higher yields."

Since November 2017, the BOK has kept its key rate at one-point-five percent, citing sluggish job figures and concerns over the U.S.-China trade spat.
But with the Fed signaling another rate hike in December, the pressure is growing on the BOK to lift its key rate in one of its last two meetings this year, in October and November.
Kim Hyesung, Arirang News.