South Korea central bank sees inflation standing above 2% target for longer

South Korea’s central bank said on Thursday that inflation will likely stand above its 2% target for quite some time amid a solid economic recovery and increasing price pressures from global supply bottlenecks.

Consumer inflation accelerated to a decade-high of 3.7% in November from a year earlier, while core CPI, which excludes volatile food and fuel, rose to 1.9%.

“Upside risks to the inflation path are seen dominant, with continued price hike in raw materials, persistent global supply bottlenecks, further recovery in consumption and rising inflation expectations seen as major factors,” the Bank of Korea said in a bi-annual review of inflation.

The report comes weeks after the BOK raised interest rates for the second time in three months and revised up its 2021 inflation forecast to a decade-high of 2.3%.

Strong price pressures raise the possibility of further monetary tightening, with markets already pricing in two more rate hikes by the end of 2022.

The base rate currently stands at 1.00%. The central bank’s next monetary policy meeting, the first in 2022, will take place on Jan. 14.

The central bank said in the report stabilising global oil prices and the country’s temporary tax cut on oil products will likely help offset strong, demand-side price pressures, adding that the Omicron variant could dampen the consumption recovery.

BOK Governor Lee Ju-yeol’s press conference on the bi-annual review of inflation will begin at 2 p.m.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

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