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

South Korea’s said on Thursday that 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 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 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 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.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor