South Korea's inflation hits nine-year high on higher commodity prices

[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 per cent 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 per cent increase in a Reuters survey. It grew 2.3 per cent 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 per cent and 23.3 per cent, respectively.

Core CPI, which excluded volatile energy and food prices, came at 1.2 per cent year-on-year, posting the sharpest increase since November 2018.

Month-on-month inflation was 0.1 per cent, slower than a 0.2 per cent increase in April.

Last week, the central bank kept its base rate at a record low of 0.50 per cent, 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.

REUTERS