SEOUL ⸺ South Korea’s consumer inflation accelerated to a more than nine-year high in May, reinforcing calls for gradual monetary tightening, though the increase was mainly due to a low base effect and rises in oil and agricultural prices.
Consumer prices rose 2.6% in May from a year earlier, government data showed on Wednesday, logging the fastest growth since April 2012 and matching a median estimate for a 2.6% increase in a Reuters survey. It grew 2.3% in April.
In May 2020, South Korea fell into deflation as the coronavirus pandemic struck demand and supply chains.
The country’s finance minister said that the impact from the low base and temporary supply disruptions for some agricultural products and oil prices will ease going forward.
“The government will prepare against the inflation risk from materialising, prevent excessive inflation expectations and take measures to stabilise living costs,” Finance Minister Hong Nam-ki said.
Wednesday’s data showed the cost of agricultural, livestock and fisheries products and petroleum surged 12.1% and 23.3%, respectively.
Core CPI, which excluded volatile energy and food prices, came at 1.2% year-on-year, posting the sharpest increase since November 2018.
Month-on-month inflation was 0.1%, slower than a 0.2% increase in April.
Last week, the central bank kept its base rate at a record low of 0.50%, but upgraded its economic outlook and projected high consumer inflation.
The bank’s governor said it is preparing to pull back on the extraordinary stimulus extended during the pandemic in the face of accelerating inflation and a build-up of dangerous imbalances.
Reporting by Joori Roh; Editing by Chris Reese and Sam Holmes; Reuters