A senior government official said Seoul will closely monitor the financial market as global market volatility could increase following the U.S. Federal Reserve's signal of an earlier-than-expected rate hike.

At a meeting with financial authorities on Thursday, First Vice Finance Minister Lee Eog-weon said the government will not lower its guard amid inflation concerns and possible rollbacks of monetary policy by major economies.

Lee said the country has strong economic fundamentals and policy room to deal with potential market volatility.

He cited the nation's FX reserves hitting an all-time high of 456-point-46 billion dollars last month, and an extended 60-billion-dollar currency swap line with the U.S until the end of this year.

After freezing its key rate at near zero at a policy meeting, the Fed forecast an earlier-than-expected rate increase in 2023 as U.S. inflation is rising amid economic recovery.

The U.S. central bank also hinted that it began discussing when to taper bond-buying programs.