Mixed reactions from Asian nations in wake of Fed rate hike
While officials in Hong Kong and China urged caution and called for further analysis following the news, those in South Korea saw the rate hike in a different light. The Federal Open Market Committee decided to raise the rate's target range by 0.25 percentage point to 0.25 to 0.50 percent, effective Thursday. The Bank of Korea's governor, Lee Ju Yeol, said the hike had long been anticipated, and said it posed little danger to South Korea, according to Yonhap News Agency. "The point of interest was not whether the U.S. would raise its key rate, but how fast it will do so, and the U.S. Fed has said the pace will be gradual," he was quoted as saying. "The negative impact on the market is not especially concerning," he added. The Financial Secretary of Hong Kong, John Tsang, however, spoke of uncertainty. "The rate increase is the first since 2006, and also a major step towards rate normalization," he told the press. "More important is the pace of rate hike that follows. Further rate increases could come gradually but the actual decision-making would depend on future data. Therefore, uncertainty remains in the future." The Hong Kong dollar has been pegged to the U.S. dollar since 1983, with a window rate of between HK$7.75 and HK$7.85 to US$1. Interest rate setting in the territory has closely followed that of the U.S. "With an unsound global economy, fluctuating monetary market conditions, exchange rates and capital flows, the global economy could face a downward spiraling trend," Tsang warned, before adding that Hong Kong was strong enough to deal with significant capital flows. China took the view that the rate hike would have some impact on the country's affairs, with Commerce Ministry spokesman Shen Danyang telling reporters at a regular briefing that further analysis is needed to determine the full effects. Stock markets across East Asia closed higher following the news.