South Korea’s headline inflation stays at high level on expensive oil products

Eurozone inflation

South Korea’s headline inflation stayed at a high level due to higher oil prices, a government report showed Friday.

Eurozone inflationConsumer prices rose 1.9 percent in February from a year earlier, according to Statistics Korea.

The consumer price inflation slightly fell from 2.0 percent in January, but it stayed at a higher level compared with recent months.

The headline inflation bottomed at 0.5 percent in August last year, before rising above 1 percent from September to December.

Oil products prices surged 13.3 percent in February on a yearly basis, raising the overall headline inflation by 0.54 percentage points. It was the fastest gain since November 2011.

Influenced by expensive oil products, industrial goods prices gained 2.4 percent in February, the highest since September 2012. Transport costs jumped 6.0 percent, raising the inflation by 0.64 percentage points.

Prices for services and farm goods gained 2.1 percent and 4.3 percent each last month, lifting the overall inflation by 1.17 percentage points and 0.335 percentage points respectively.

Prices for agricultural, livestock and fishery products advanced 4.3 percent in February, but it was down from a 8.5 percent increase in January as egg price growth slowed down amid the reduced effect from the outbreak of avian influenza.

Egg prices soared 50.6 percent in February from a year earlier, down from a 61.9 percent jump in the prior month. Compared with the prior month, the prices for egg turned downward.

The outbreak of foot-and-mouth disease has little impact, with prices for beef and chicken rising 1.1 percent and 5.6 percent respectively.

Prices for electricity, tap water and natural gas declined 8.3 percent, pulling down the consumer price inflation by 0.35 percentage points.

Core consumer prices, which exclude volatile agricultural and oil products, rose 1.5 percent last month.

The so-called livelihood prices, which reflect daily necessities costs, increased 2.3 percent.

The rising pace of food costs declined from 4.4 percent in January to 3.2 percent in February, but costs except food rose at a faster pace from 1.4 percent to 1.9 percent in the same period.

Fresh food prices, which include fruits and vegetables, increased 4.8 percent in February from a year ago, posting the single-digit growth after the fifth consecutive month of double-digit increase.

South Korea’s central bank is expected to be placed under more pressure to raise its benchmark interest rate as the consumer price inflation hovers at a high level and the U.S. Federal Reserve’s rate hike is expected in the near future.

The Bank of Korea (BOK) lowered its policy rate from 3.25 percent in July 2014 to an all-time low of 1.25 percent in June last year.

The Fed is forecast to raise interest rates as early as this month, after indicating three rate hikes in 2017 alone.

The BOK, however, is facing a dilemma as higher interest rates will increase debt-servicing burden on households which are struggling with record-breaking debts. Enditem

Source: Xinhua/

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