September 21, 2017 / 12:42 AM / a year ago

Fed's decision to reduce portfolio to have limited impact on Korea policy -S.Korea govt source

SEOUL, Sept 21 (Reuters) - The Federal Reserve’s decision to reduce its $4.2 trillion in holdings of U.S. Treasury bonds and mortgage-backed securities will have little impact on South Korea’s policy rate decisions, a government source said on Thursday.

“The Fed’s signal that it will again raise interest rates before the end of the year was a little hawkish as U.S. economic indicators aren’t that great,” the South Korean government official told Reuters. The official asked not to be named due to sensitivity of the issue.

When asked if the Fed’s portfolio reduction could influence monetary policy in South Korea, the official said “not really.”

The Bank of Korea’s current policy rate is at a record low of 1.25 percent. Its independence to set policy interest rates is guaranteed by law but many market participants still say the government influences the central bank’s policy direction. (Reporting by Shin-hyung Lee, Cynthia Kim; Editing by Sam Holmes)

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