Federal Reserve Chairman Jerome Powell delivers remarks at a news conference following a Federal Open Market Committee (FOMC) meeting at the Federal Reserve, March 19, in Washington, D.C. AFP-Yonhap

The domestic financial market will face greater volatility due to uncertainties surrounding the Federal Reserve's monetary policy and geopolitical risks, among other factors, the Korean central bank said Thursday, vowing to continue closely monitoring the market.

Bank of Korea (BOK) Deputy Gov. Ryoo Sang-dai made such an assessment in a meeting to review market conditions after the Federal Reserve kept its benchmark interest rate unchanged Wednesday (U.S. time).

"The Fed's meeting generally aligned with market expectations, but (Jerome) Powell noted that the economy is facing uncertainty and policy changes will influence the future monetary path. External uncertainties are expected to persist, given February's monetary policy, the U.S. tariff plans and geopolitical risks surrounding the Russia-Ukraine war," Ryoo said.

"These external risk factors, along with domestic political and economic situations, could lead to greater volatility in the domestic financial and foreign exchange markets. We will remain vigilant and closely monitor the markets," he added.

The Fed signaled that it expects to cut policy rates twice this year, while revising its forecast for U.S. economic growth in 2025 down to 1.7 percent, from the earlier projection of 2.1 percent.

Powell told a press conference that the potential "significant policy changes" by the Donald Trump administration regarding trade, immigration, fiscal policy and regulation, and their effects on the economic outlook are "high," according to foreign media reports.

The Fed's latest rate decision put the gap between the key rates of Korea and the United States at up to 1.75 percentage points.

Late last month, the BOK lowered its policy rate by a quarter percentage point to 2.75 percent in an effort to spur growth, marking the third reduction in the current monetary easing cycle following the policy shift in October. (Yonhap)