SEOUL (REUTERS) – South Korea’s consumer inflation accelerated to a near 10-year peak last month on higher costs in oil products, housing rentals and outdoor dining, putting pressure on policymakers ahead of the last monetary policy meeting of the year.
The consumer price index (CPI) jumped 3.2 per cent from a year earlier in October, government data showed on Tuesday (Nov 2), the fastest growth since January 2012 and up from a 2.6 per cent rise in September.
That matched a 3.2 per cent increase tipped by analysts in a Reuters survey and remained above the central bank’s 2 per cent target for a seventh straight month.
The breakdown of data showed the cost of petroleum surged 27.3 per cent, while that of housing rentals rose 1.8 per cent on year. Costs of outdoor dining increased 3.2 per cent, while other services including accommodation also rose 2.3 per cent.
That puts the Bank of Korea’s (BOK) monetary policy board under pressure to raise the base rate further at the Nov 25 meeting, following its first rate hike in almost three years in August.
Governor Lee Ju-yeol last month flagged further tightening could come as soon as this month to curb rising inflation and household debt.
The BOK currently sees inflation standing at 2.1 per cent for the whole of this year and 1.5 per cent for next year, but the revision of forecasts will be announced at the meet this month.
Tuesday’s data also showed core CPI rose 2.4 per cent year-on-year, the fastest growth since December 2015 and up from 1.5 per cent in September.
Month-on-month inflation rose 0.1 per cent, slowing from September’s 0.5 per cent rise but in line with forecasts.
New rules aimed at moving South Koreans toward “living with Covid-19” came into effect on Monday and are expected to boost consumer spending, with curfews on restaurants and cafes being lifted and all remaining curbs to be scrapped by February except for mask-wearing.
The government also decided to temporarily cut domestic tax on key oil products by 20 per cent, which is expected to help consumers save up to 2.5 trillion won (S$2.87 billion) over a six-month period.