Bank of Korea flags chances of faster-than-expected inflation pace

[SEOUL] South Korea's central bank on Thursday warned that consumer inflation could gain traction at a faster-than-expected pace with the ongoing recovery from the pandemic.

"Inflation could temporarily increase due to normalisation of economic activities with ongoing vaccination, and as pent-up demand shows up," the Bank of Korea (BOK) said in its monetary policy report.

South Korea's consumer inflation accelerated to a 13-month high in February on improving domestic demand and rising global oil prices, further signalling a gradual recovery in Asia's fourth-largest economy.

The BOK in February raised this year's inflation outlook to 1.3 per cent from 1 per cent earlier, while keeping the policy interest rate unchanged at a record low of 0.5 per cent.

The BOK also said it will closely monitor local bond yields of long-term maturity and take appropriate measures should volatilities worsen.

REUTERS