If inflation concerns from the US lead to interest rate hikes, the government’s diagnosis that pressure on Korea’s benchmark interest rate will be put on the burden of household debt.
The government announced the “Economic Policy Inspection and Implications of the US Biden Government” at the Foreign Economic Ministers’ Meeting and the Foreign Economic Cooperation Fund Management Committee held by the Minister of Strategy and Finance, Hong Nam-ki,
First, the government 폰테크 decided that it is highly likely to change the US economic paradigm over 100 days after the US Biden government was launched.
“We believe that Sincaines scholars (Bidenomics) are likely to trigger inflation with excessive fiscal spending,” the government said. “There are criticisms such as excessive government debt concerns and inefficiency of cash support for low-income families.”
The government said it expects success and sustainability to be determined depending on whether inflation occurs and whether the Democratic Party wins the 2022 midterm elections.
The government said, “The US’s large-scale fiscal policy will lead to a recovery in the local private consumption-oriented economy, which will lead to a global economic recovery, which will lead to a macroeconomic upward trend due to the increase in exports of Korea.”
However, it is pointed out that corporate tax and capital gains tax hikes may shrink corporate activities and act as a downward factor in US and global growth in the mid- to long-term. The government pointed out that uncertainty is also caused by rising global asset value due to liquidity increase, inflation due to lack of supply, and interest rate hikes.
The government explained that it should preemptively prepare for tax and environmental issues such as the global minimum corporate tax and digital tax proposed by the Biden government and closely monitor the pressure on Korea’s interest rate hike and the burden of household debt management when interest rates rise.
The government emphasized, “We must respond timely to the possibility of volatility in the future when inflation expectations of the market change rapidly, and the Fed and the market fail.”
“We will monitor domestic and foreign financial and foreign exchange market trends and take measures to stabilize the market when volatility expands sharply.” We must continue to manage the international credit rating agencies and overseas investors, and continue to consult with the Biden government on exchange rates. “He said.
Meanwhile, Hong Nam-ki, Deputy Prime Minister and Minister of Strategy and Finance, said, “We will thoroughly manage potential external risk factors such as global inflation concerns and foreign capital fluctuations.” It is essential to thoroughly manage external risk factors in the second half of this year to support the rapid economic recovery in Korea. “