Households must have felt relieved when Statistics Korea announced on Aug. 1 that the July consumer price index marked a 1.5 percent increase ― the lowest since July 2009. But the euphoria was short lived, as the prices of perishables, such as spinach and lettuce, shot up with the heat wave gripping the nation.
It is not just perishables whose prices have been climbing rapidly. High global crop prices are being transferred to those of processed food items, such as instant noodles. The Korea Rural Economic Institute forecasts that year-end flour prices will be 27.5 percent higher than in the second quarter of this year, adding that agricultural items that will have gained more than 10 percent in price include ground corn, vegetable oil and animal feed.
Also on the waiting list are government-regulated prices, such as transportation fares and utility bills.
Taxi fares, which are adjusted every three years, will be raised this year. If past raises are any guide, the basic rates, now ranging from 2,000 won to 2,400 won, will surpass the 3,000 won mark. Local, inter-city and express bus fares are also set to rise, possibly ranging from 5 percent to 10 percent.
Korea Electric Power Corp. is pushing for another rate increase after a 4.5 percent raise on Aug. 6. The government-invested corporation raised its rates on two occasions last year ― 4.9 percent in August and another 4.5 percent in December.
Price stabilization is a key task for the Bank of Korea. But the central bank has little wiggle room, given that it is being pressured to cut its benchmark rate that is already low.
Soaring consumer prices are also creating a conundrum for the administration, which has repeatedly promised in the past to give price stabilization top priority in its policy. President Lee Myung-bak told his Cabinet on Monday to monitor and manage the prices of agricultural products and other daily necessities ahead of the Chuseok holiday next month.
The administration should make efforts to stabilize consumer prices, as it has promised. But the caveat here is that it will have to use the legitimate tools that it holds in its possession, instead of resorting to arm twisting to keep prices low.
For instance, the administration may choose to lower customs duties for certain items in short supply. But few would agree with a top Fair Trade Commission official, who reportedly asserted that a mere exchange of information on import prices could be construed as price fixing.
