South Korea Dec inflation at 3.7%, 2021 rate at decade high of 2.5%

[SEOUL] South Korea's annual inflation this year outpaced the central bank's current forecasts and soared to a decade-high, proving to policymakers prices are becoming harder to tame and boosting the case for more interest rate hikes in 2021.

The average consumer inflation rate for the whole year surged to 2.5 per cent, the fastest since 2011 and up from 0.5 per cent in 2020, government data showed on Friday (Dec 31).

That beats the Bank of Korea's (BOK) 2.3 per cent projection made in November.

December consumer prices jumped 3.7 per cent from a year earlier, slightly slowing from a decade-high of a 3.8 per cent rise in November and beating a 3.6 per cent gain tipped in a Reuters survey.

Rebounding services spending and persistent supply disruptions are underpinning inflationary pressure in Asia's fourth-largest economy and fanning views that the BOK could raise interest rates at its next policy meeting on Jan 14.

On Nov 25, the BOK raised interest rates for the 2nd time since the pandemic began to 1 per cent and revised up it's inflation outlook as concerns about rising household debt and consumer prices grew.

An index measuring service costs increased 2.6 per cent from a year earlier in December after a 2.4 per cent gain a month earlier, while fresh food prices jumped 6.7 per cent following a 5.6 per cent increase in November.

REUTERS