South Korea’s consumer prices jumped 4.7 percent in July from a year earlier, staying above the government’s target inflation rate of 4 percent for the seventh month in a row amid growing worries over its impact on the overall economy.
The year-on-year figure in July marked a bigger jump than the 4.4 percent increase the previous month, according to a report by Statistics Korea on Monday. The country’s consumer price index also rose 0.7 percent last month from June.
“Prices of fresh foods rose significantly due to heavy rains last month, with costs of pork, processed goods and many other items increasing from a year earlier,” Yang Dong-hee, head of the agency’s price statistics division, told the Yonhap news agency.
Core inflation, which excludes volatile food and energy prices, also rose 3.8 percent from a year earlier, hitting a 26-month high. The figure was also up from 3.7 percent in June.
The Ministry of Strategy and Finance said in a report that consumer prices are expected to stay at 4 percent or higher in August, as uncertainty related to the weather conditions is likely to persist.
Heavy rainfall ravaged the central region and some farmlands in other parts in July, driving up the nation’s fresh food price index by 9 percent last month from the year-earlier period.
“The prices are expected to face upward pressure for a while, but the index would stabilize and go down below the 4-percent level starting from September,” the ministry said.
The fresh prices data signal that the government is now facing stronger headwinds than previously expected in curbing inflation, a key factor that is taking precedence over economic growth for policymakers ahead of the presidential elections next year.
The state’s official annual inflation target for 2011 was recently revised up to 4 percent, from 3 percent, reflecting the rapid buildup of inflationary pressure in recent months.
Factors that add to inflationary pressure are also waiting in the wings: electricity bills will be hiked by 4.9 percent from this month, and other public service charges are also set to be raised soon.
The Bank of Korea is increasingly pressured to deal with the surging prices through its monetary policy, but it kept the interest rate intact at 3.25 percent. The central bank is set to hold its next rate-setting meeting on Aug. 11.
By Yang Sung-jin (
insight@heraldcorp.com)
