Why U.S. Interest Rates Matter for the Korean Economy

Interest rates can be called the core of finance that determines the flow of money.
It would be no exaggeration to say that these interest rates determine the flow of money around the world.
That is why, investing aside, we should pay attention to changes in interest rates even just for our basic economic lives.
Recently, the Bank of Korea froze its base rate at 3.0%. Bank of Korea Governor Rhee Chang-yong explained that it froze the rate due to the surge in the exchange rate.
With the strong U.S. dollar coinciding with the domestic martial law situation, the exchange rate rose as high as 1,480 won. When the exchange rate rises, the prices of imports such as energy and raw materials go up.
In Korea, which depends on imports in many areas, rising prices could make life even harder for ordinary households.
On top of this, most people believe the Bank of Korea could not rush to cut rates because U.S. rates had not yet been decided.
If Korea decided to cut rates and the U.S. did not, the interest rate gap between Korea and the U.S. would widen further, and the exchange rate would rise even more as people sell won and buy dollars.
If a hasty rate cut pushed the exchange rate even higher when it is already high, Korea's economy could fall into recession due to a prolonged high exchange rate.
In the end, Korea's interest rates are very heavily influenced by U.S. rate decisions. This is because the whole world follows the direction of U.S. rates.
In particular, if you invest in financial products such as stocks and bonds, you need to check the schedule of U.S. rate announcements, which move the global economy, and respond in line with that schedule.
The 2025 U.S. FOMC meeting and rate announcement dates (Korea time) are as follows.
The dot plot is data compiled from the interest rates that each FOMC member individually thinks appropriate.
● January 29 (Wed) – 30 (Thu)
● March 19 (Wed) – 20 (Thu) Dot plot released
● May 7 (Wed) – 8 (Thu)
● June 18 (Wed) – 19 (Thu) Dot plot released
● July 30 (Wed) – 31 (Thu)
● September 17 (Wed) – 18 (Thu) Dot plot released
● October 29 (Wed) – 30 (Thu)
● December 10 (Wed) – 11 (Thu) Dot plot released
The U.S. FOMC rate decisions will be announced according to the schedule above.
It will differ by investment product, but looking at the most important one, the stock market, if rate cuts continue, U.S. stocks are expected to rise.
This is expected to have a positive effect on the Korean market as well.
So you should check the dates above and keep a close eye on whether rates are cut.
For reference, the U.S. CME Group's FedWatch forecasts U.S. rates for 2025 as follows.
● January 29 (Wed) – 30 (Thu) -> 4.25 ~ 4.50 (94% probability)
● March 19 (Wed) – 20 (Thu) -> 4.00 ~ 4.25 (42% probability), 4.25~4.50 (56% probability)
● May 7 (Wed) – 8 (Thu) -> 4.00 ~ 4.25 (44% probability), 4.25~4.50 (45% probability)
● June 18 (Wed) – 19 (Thu) -> 3.75 ~ 4.00 (24% probability), 4.00 ~ 4.25 (45% probability), 4.25~4.50 (28% probability)
● July 30 (Wed) – 31 (Thu) -> 3.75 ~ 4.00 (28% probability), 4.00 ~ 4.25 (41% probability), 4.25~4.50 (22% probability)
● September 17 (Wed) – 18 (Thu) -> 3.50 ~ 3.75 (12% probability), 3.75 ~ 4.00 (30% probability), 4.00 ~ 4.25 (37% probability), 4.25~4.50 (17% probability)
● October 29 (Wed) – 30 (Thu) -> 3.50 ~ 3.75 (14% probability), 3.75 ~ 4.00 (31% probability), 4.00 ~ 4.25 (34% probability), 4.25~4.50 (15% probability)
● December 10 (Wed) – 11 (Thu) -> 3.50 ~ 3.75 (16% probability), 3.75 ~ 4.00 (31% probability), 4.00 ~ 4.25 (32% probability), 4.25~4.50 (13% probability)
Looking at the current rate forecasts, the table shows that rates will clearly head downward.
However, going all-in on products that benefit from falling rates just because rates will be cut is not a good investment.
As forecast above, rates are expected to fall in 2025, but the problem is that everyone already knows this, and it is already fully priced into the market.
If rates move differently, outside the forecast range, the direction of the stock market will also change.
So we must be sure to check this schedule, listen to the news on how rates are decided, and be prepared to respond accordingly if an unexpected situation arises.
Whatever the product, when investing, responding matters more than predicting.