[News UP] U.S. benchmark interest rate cut by 25 basis points...The Bank of Korea's choice for November is

■ Host: Cho Jin-hyuk Anchor
■ Starring: Kwon Hyuk-joong, Economic Critic

* The text below may differ from the actual broadcast content, so please check the broadcast for more accurate information. Please specify [YTN News UP] when quoting.

[Anchor]
As I told you, the U.S. Federal Reserve cut its benchmark interest rate again in a month. Following the last big cut, the reduction level is 0.25%. Still high levels of volatility in the dollar's exchange rate are likely to deepen the BOK's agony ahead of its key rate decision later this month. Let's take a look at this content, Kwon Hyuk-joong, an economic critic, and review it. How are you? Even before the announcement of the key interest rate cut by the U.S. Fed, the market was already expecting it. What background should I say it dropped by 0.25 percentage points?

[Recommending]
First of all, I can tell you two reasons. As inflation is approaching the Fed's target of 2%, it can be seen as an expression of confidence that it can continue to cut interest rates. Second, the overheating of the job market has been resolved to some extent. Because of this, the Fed decided to cut interest rates. Interest rates were already foreseen. According to the dot plot at the FOMC meeting in September, the market already predicted that it could cut interest rates twice within the year, as it had already lowered the interim rate from 5.1% to 4.4%. So I'm telling you that we've cut interest rates by about a quarter of a percentage point this time, and there's a possibility of another rate cut in December, as the market expects.

[Anchor]
The response was positive in the market. The New York Stock Exchange, which closed early this morning, closed strong again, right?

[Recommending]
That's right. The S&P 500 rose 0.74%. Then, the Nasdaq rose 1.51% and the Dow remained flat, but the New York Stock Exchange is looking at the benchmark interest rate very positively. The second reason for this was confirmed that the presidential election rally continues. Second, the preference for risky assets rather than safe assets has increased. Because if Trump takes power for the second time, he made a pledge on tax cuts. If that happens, it's a great boon for companies. Therefore, as these things affect the stock market, the preference for risky assets has increased. That's why the New York Stock Exchange continues to rise, and this time the Nasdaq and S&P 500 indexes are rising to record highs. So it's not the Korean stock market that no one can predict how much it will go up anymore. I'm telling you that the New York Stock Exchange is hot.

[Anchor]
In addition, since the dot plot of this FOMC has not been announced, Chairman Powell has no choice but to pay attention to the future outlook, but has Chairman Powell revealed anything about the future interest rate outlook, including in December?

[Recommending]
Chairman Powell said this. In the short term, the presidential election has no impact, but in the long run, it could have an impact. Because there were a lot of pledges. As you know, Trump's second-term pledges may actually have good tax cuts and good news for the stock market, but they also have adverse effects on the stock market. There are also areas that are bound to affect interest rates. In particular, tariffs will increase if you keep to your pledge. Then, the increase in tariffs means that the U.S. will raise prices. If that happens, the Fed's signal for a rate cut will inevitably be delayed. Although Powell does not see any impact in the short term, there is a possibility that next year's interest rate cuts will slow down to some extent because these, in principle, the administration's policies, affect over time. I would like to say that I can clearly feel the concerns about these points.

[Anchor]
In this way, the interest rate difference between Korea and the United States has decreased to 1.5 percentage points again. The concern is the exchange rate. The dollar exchange rate soared sharply after Trump's election in the U.S. presidential election, so how do you forecast the domestic fallout from this?

[Recommending]
So I think it's a concern right now. I pierced the 1,400 won line. It was actually a psychological resistance line from our point of view. However, since it has risen more than 1,400 won, the time has come to look at 1,400 won as a normal, as Deputy Prime Minister for Economy Choi Sang-mok said. In particular, there is a part where the strong dollar continues to come out. As you know, as I said earlier, there is a possibility of inflation if we go according to Trump's pledge in the United States. If that happens, the pace of interest rate cuts will inevitably slow down, as I said earlier. Then, interest rates will inevitably remain high. Then you'll get a strong dollar. Naturally, the exchange rate is bound to continue to rise. So, what the market is concerned about is that in Korea, we literally buy all the oil and energy, but when the exchange rate rises, it affects Korea's prices. So I'm concerned about these things. Maybe for the time being, the strong dollar will continue. It means that the exchange rate will rise, and there is a very high possibility that it will naturally adversely affect Korea's prices. Therefore, the situation in the Middle East is also very uncertain, but there are some areas that are affecting the strong dollar due to uncertainty. Because the dollar is a safe asset, when you have this uncertainty, people buy a lot of dollars. So let's say there's a possibility that the demand for the dollar will increase and the strong dollar will continue.

[Anchor]
You said that the high exchange rate in the 1,400 won range could become the new standard and new normal. Because of this, the Bank of Korea is likely to suffer more, especially. First of all, the last Monetary Policy Committee is scheduled to be held on the 28th, so what kind of concerns do you have about determining the base rate?

[Recommending]
There are two concerns. If you cut interest rates, for example, it's actually a decline in the value of the won. Then the exchange rate may fluctuate once again. As the value of the won declines, the exchange rate rises. The relatively strong dollar can have a negative impact on Korea. However, if we freeze interest rates, it is true that Korea's economic slowdown is now. There was an economic slowdown and GDP growth grew by 0.1% in the third quarter, but the market expected growth of 0.5% but fell by about 0.4 percentage point. So it's slowing down and some say it's a recession. In this situation, we need to preemptively cut interest rates. However, if the interest rate cut is frozen, this is also a concern because it cannot be defended preemptively. So now the Bank of Korea is in a dilemma from the perspective of the Monetary Policy Committee. The exchange rate was not a condition when the Monetary Policy Committee decided on the interest rate. It was not a condition to worry about, but now the exchange rate has become a condition to worry about, so we need to see what the Monetary Policy Board will decide because of the current exchange rate, but my personal judgment is to cut interest rates by 0.25 percentage points as planned. Why? I think it's right to cut interest rates once more to preemptively prevent Korea's economic slowdown.

[Anchor]
I will also ask you questions about our stock market. The KOSPI and KOSDAQ have opened now, but they are starting to rise. It looked very confusing yesterday, but it's going up now. In particular, looking at the details, it seems that supply and demand are coming back from the secondary battery, so what do you think of our stock market outlook?

[Recommending]
Our stock market does not expect to continue its good trend until this year, but the reason it rose in the early market today is the short-term buying. I fell a lot yesterday. As a result, there was a lot of fall yesterday, centered on the second leasehold. As a result, low-priced purchases are flowing into the market now. Of course, it will be popular around dividend stocks. Now that there is a cold wind, people will be interested in dividend stocks, but overall, the transaction price is missing a lot from the current situation. These parts can have a negative impact. However, there are two positive things to look at. First of all, the uncertainty of the presidential election has completely disappeared. Next, the gold investment issue is now over. So there were three things that were beating our stock market. Financial investment, uncertainty about the U.S. presidential election, transaction value. There's so little transaction money. Everyone went to the U.S. But two things are completely over. Then, if only the transaction price comes into our market, the good flow will continue, and it seems that it is also in the hands of foreigners that the transaction price comes in. So if foreigners say they are buying now, investors will invest in the Korean stock market once again. There is a possibility that it will be reflected as a good thing. So, today, the stock price rises due to the backlash buying sentiment against low-priced purchases, but fundamentally, fundamentals are still weak, so we should wait and see how long this trend will continue.

[Anchor]
You explained that it was a backlash purchase. Curiously, wouldn't it be possible for our stock market to continue its upward rally only when foreigners' money enters our market? There are many analyses that are creating a bad environment for foreigners to enter our market, so could you also point this out?

[Recommending]
The exchange rate needs to be stabilized. First of all, from the standpoint of foreigners who think that the exchange rate will continue to rise, of course, they will preemptively sell in advance. Because when you enter Korea, you invest in won, but when there is a signal that the exchange rate continues to rise, of course, there are many foreigners who switch to dollars in advance. So the demand for investment is bound to escape. That's why it's because of the exchange rate. As a result, the financial authorities should quickly show the exchange rate authorities stabilizing the exchange rate. Of course, fine-tuning has been done. The exchange rate authorities are trying to intervene in the exchange rate market and drop it below 1,400 won, but it seems that they are having a hard time defending it because the strong dollar stance is so high. That's why the biggest goal is to stabilize the exchange rate. So if that becomes a signal, foreigners will once again enter the Korean market. You can check the supply and demand at Samsung Electronics. So I would like to tell you that the momentum of Samsung Electronics is very important. I will tell you to take a good look at the trends of foreigners and make a judgment.

[Anchor]
It is also necessary to establish a highly volatile market response strategy. I was with Kwon Hyuk-joong, an economic critic. Thank you.