US rate path uncertain amid inflation, Mideast tension: finance ministry

The path for U.S. interest rates remains uncertain due to ongoing inflation and geopolitical instability in the Middle East, according to South Korea's finance ministry. First Vice Finance Minister Lee Hyoung-il led discussions with financial authorities, including the Bank of Korea, following the U.S. central bank's decision to hold its benchmark rate steady at 3.5-3.75 percent for the fifth consecutive time.

Officials noted that the U.S. economy is demonstrating solid momentum, with business facility investment remaining robust, largely fueled by AI-related investments. However, they also assessed that persistent high inflation in the U.S. and Europe, coupled with geopolitical tensions in the Middle East, contributes to the uncertainty surrounding future rate adjustments.

The meeting participants committed to closely monitoring the monetary policies of major global economies and observing trends in international oil prices. The current pause in U.S. rate hikes has resulted in an interest rate differential of up to 1 percentage point between South Korea and the United States.