South Korean consumer prices stayed well above the Bank of Korea’s (BOK) target last month, data released yesterday showed, keeping the pressure on policymakers to continue tightening as central banks move to tamp down inflation.
Consumer prices rose 3.6 percent from a year earlier, edging down from a 3.7 percent gain in December last year, according to BOK data, which ran hotter than economists had expected.
South Korean inflation has held above 3 percent since October last year, well in excess of the bank’s 2 percent target, suggesting that three rate hikes since August have so far failed to cool momentum in the nation’s consumer prices that is part of a global wave.
Photo: Bloomberg
European Central Bank President Christine Lagarde on Thursday said that it is no longer sensible to exclude a rate move this year, while the Bank of England hiked for a second meeting in a row to contain the fastest inflation in three decades.
Still, most economists do not see another increase from the BOK this month, the last meeting before Governor Lee Ju-yeol steps down and as the nation heads into a presidential election.
“This doesn’t mean the BOK will hike its rate again this month, after having moved in January,” strategist Roh Hyun-woo at Hanwha Asset Management said of Korea’s inflation figures. “It’s part of a global upswing in consumer prices that you can feel for yourself when you’re at stores.”
“South Korea’s inflation cooled a little in January and looks set to slow further, but it probably won’t drop back to around the Bank of Korea’s 2 percent target until the third quarter. We expect the BOK to pause and take stock of its quick 75 basis points of rate hikes since August, and resume tightening in the second half of 2022,” Bloomberg economist Justin Jimenez said.
While monetary easing from the BOK and other central banks helped support economies during the COVID-19 pandemic, such policies have also fueled asset bubbles and price gains that analysts warn could damp longer-term economic growth.
Minutes from the BOK’s meeting last month, released on Thursday, showed board members calling for more vigilance on inflation, with one calling for a “pre-emptive response.”
Yesterday’s report also showed that consumer prices excluding costs for oil and agricultural goods rose 3 percent, the highest reading in 10 years for so-called core inflation.
December transportation costs slipped 0.3 percent from a month earlier, but rose 7.2 percent year-on-year. Food and beverage prices increased 5.5 percent from a year earlier, while utility costs rose 3.3 percent.
The BOK is to make its next rate decision on Feb. 24, the last meeting before Lee steps down next month and voters go to the polls to pick a new president.
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