The Rate Map Under $100 Oil: the BOK, the Fed and the BOJ Hiked. Taiwan and China Held.

Interest rates can't move the price of oil. That was the gist of Fed Chair Kevin Warsh's answer at the press conference after he raised rates on September 16, and the exchange sits in the Fed's preliminary transcript. A CBS reporter pointed out that a quarter-point hike does not reopen the Strait of Hormuz. "We cannot affect any individual price, whether it be oil prices, whether it be food stuffs at the grocery store," Warsh said. He went on: "But what we can do, and will do, is ensure that any change in relative prices don't broaden out."

The Bank of Korea moved on August 27, the Fed on September 16, the Bank of Japan on September 18. Three quarter-point hikes in 22 days. Taiwan's central bank left its policy rate alone a few hours after the Fed's announcement. China's loan prime rate, the benchmark its commercial banks quote each month, stayed put on August 20 as well. PRISM compared the BOK's monetary policy decision statement, the BOJ statement, the Taiwan central bank's press release and the Fed statement. None of them names oil as a reason in its decision language.

Oil turns up in the background passages of the Korean, Japanese and Taiwanese documents. The Fed's statement contains neither oil nor energy. In August, US energy prices were up 16.3% from a year earlier (Bureau of Labor Statistics) and Taiwan's fuel costs 11.86% (DGBAS, Taiwan's statistics agency). Korea's petroleum products index rose 14.2% (National Data Office, Korea's statistics agency). Brent has been trading above $100 a barrel amid tension in the Strait of Hormuz. The November contract settled at $103.87 in New York on September 18 (Bloomberg).

Five decisions, in each bank's own words

Europe produced both answers in the same stretch. The European Central Bank decided on September 10 to raise its deposit rate by 25 basis points to 2.5%, effective September 16 (ECB), and the Bank of England held at 3.75% on a 6-3 vote announced September 17, with three members pushing for a hike to 4% (Bank of England).

What the three hikers share: stopping the spread

The three that moved overlap on exactly one thing. Stop price increases before they broaden. The BOK wrote into its decision that pre-emptive action to "prevent the spread of upward price pressure" was important, and added growth running stronger than expected plus financial stability risk. The BOJ judged that underlying inflation has closed in on 2% and that medium- and long-term inflation expectations keep climbing. Warsh said the US economy appears to be strengthening, and that overall financial conditions are hard to call restrictive.

US consumer prices rose 3.4% in August, with core up 2.4% (Bureau of Labor Statistics). PRISM reads the gap between those two figures as coming mostly from energy, up 16.3%. The spread Warsh says he wants to block is that gap migrating into core.

Korea's housing, America's independence fight, Japan's two dissents

Korea stacked housing and credit on top of the shared logic. Household loans at banks stood at 1,198.3 trillion won at the end of August, up 3.4 trillion won in a month (BOK data released September 9). Governor Hyun Song Shin said the bank moved early to avoid a costlier fix later, reaching for a Korean proverb about plugging with a hoe what would otherwise take a shovel (Etoday). The vote was 6-1. Board member Hwang Kun-il wanted to hold. He argued for more time to confirm whether demand-side price pressure is persistent (minutes released September 15; Edaily and Herald Business).

In the US the vote was 12-0. The hawkish turn at Warsh's Fed that PRISM flagged in early July became an actual hike. Warsh is President Trump's own pick, and he raised rates seven weeks before the midterms, which reopened the argument over Fed independence. Trump demanded cuts on Truth Social and said he had told Warsh he might as well vote with the board (Yahoo Finance, CNBC). Warsh gave reporters nothing on his conversation with the president and described independence as a two-way street. Republican Senator Mike Rounds said the Fed "showed that they were independent" (Politico).

The BOJ split 7-2. The new 1.25% rate takes effect on the 24th, the highest level since 1995 (Nikkei). Governor Kazuo Ueda said the policy phase has changed (NHK). The two dissents came down to inflation. Core consumer prices rose 1.7% in August, an eighth straight month below 2% (Nikkei, NHK). Board member Ayano Sato said raising rates now is not appropriate (BOJ statement). Nikkei reported that the yen sold off on the two dissents and slipped briefly into the 158-per-dollar range.

Taiwan froze rates and loosened mortgages

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Taiwan's central bank held its discount rate at 2% on the afternoon of September 17, a tenth straight quarter on hold since the hike in March 2024. At the same meeting it raised the cap on loans for an individual's second home purchase from 60% to 70% of appraised value, effective the 18th. Governor Yang Chin-long said Taiwan walks its own road (Economic Daily News). The bank's growth forecast for this year is 11.48%. Yang said exports pulled that growth and it has yet to reach domestic demand, a split he summed up as "hot outside, warm inside" (外熱內溫). He also cited a K-shaped divide across industries and the burden a hike would place on first-time homebuyers (CNA).

The hold drew dissent, and the mortgage easing drew suspicion that elections were behind it. Two directors argued for a hike (United Daily News, CNA). Yang said the decision had nothing to do with elections (Newtalk, CNA).

On the mainland, the argument is about when to cut

China's LPR stood at 3.0% for one year and 3.5% for five years and over as of August 20, unchanged for 15 months.

Costs are climbing while demand stays soft. August producer prices rose 3.8% and producer purchase prices 5.8% (National Bureau of Statistics). PPI for consumer goods fell 0.5%, and core consumer prices managed a rise of 1.0%. That combination makes hiking awkward and cutting awkward too.

[Outlook] At its August 1 conference on second-half work, the People's Bank of China said it would maintain an "appropriately loose" monetary policy. Feng Lin of Dongfang Jincheng said prices are not likely to be the main obstacle to a rate cut (Yicai).

Same month: Seoul tightened, Taipei eased

Korea's Financial Services Commission instructed banks on September 9 to tighten mortgage management for the autumn moving season, a peak stretch for Korean housing turnover (Global Economic). Taiwan's central bank loosened its mortgage rule on the 17th of the same month.

What it leaves on Korean borrowers and the won

The won/dollar rate went from 1,480.4 on July 16 to 1,383.3 on September 18, a drop of 97.1 won. Both are 3:30 p.m. onshore closes (Money Today and others). A lower number means a stronger won, so the won gained that much ground. Measured against the September 16 close of 1,368.6, before the Fed's hike, the rate is 14.7 won higher two days later. The won gave some of the move back. The gap between the top of the Fed's target range and the BOK's policy rate widened from 0.75 percentage point to 1.00.

Inside the BOK board, the same exchange rate got two readings. Hwang argued for a hold, saying the won's substantial appreciation had eased the burden of keeping policy restrictive to defend the currency (minutes; Edaily, Herald Business).

[Outlook] Shin said a sustained stronger won could offset much of the pressure coming from import prices (Etoday).

The next fork is the last week of October

[Outlook] The median dot among BOK board members for six months out is 3.25%. Shin described that as one more hike from where rates sit now (Etoday, Newspim). On August 27 the consensus in Korea's bond market was a pause in October and a hike in November (Etoday). Shinhan Securities said a hike could be pulled forward into the fourth quarter if high oil prices and another Fed increase arrive together (Global Economic).

[Outlook] The median year-end policy rate in the Fed's Summary of Economic Projections is 4.1%. Sixteen of the 18 participants marked a year-end rate above today's, and none marked one below. CME FedWatch put the odds of an October hike at 45% to 53% on September 16 and 17 (Reuters and others). The BOJ wrote in its statement that it will keep raising rates as the economy and prices warrant.

The BOK meets on October 22, the Fed on October 27 and 28, the BOJ on October 29 and 30. Six days after the Fed wraps up comes November 3, the US midterm elections. For Korean borrowers on floating rates, the first number to arrive is the September COFIX, published in mid-October.

This article is for information purposes only and is not a recommendation to buy any financial product or to invest.