South Korea's top central banker on Wednesday downplayed concerns that the country may face deflation, given the underlying price pressure and inflation expectations.
Some experts said South Korea's low consumer prices are raising concerns that Asia's fourth-largest economy may undergo deflation similar to that of Japan.
Korea's inflationary pressure remains subdued as consumer prices ran below the 2.5-3.5 percent inflation target band of the Bank of Korea (BOK) for the 18th straight month in November. The on-year growth of consumer inflation picked up to 0.9 percent in November from 0.7 percent in October.
BOK Gov. Kim Choong-soo said in a meeting with experts that it is not proper for Korea to worry about deflation, saying that consumer inflation tends to follow the movement of core inflation.
Core inflation, which excludes volatile oil and food prices, measures the underlying price pressure. Korea's core inflation rose 1.8 percent on-year in November. The inflation expectation rate was 2.9 percent in November, unchanged from the previous month.
The governor said that if the impacts of free childcare programs on inflation are eliminated, core inflation is seen to be around 2 percent. Free welfare programs usually pull down upward pressure on consumer prices.
"But it is true that consumer prices are running below the central bank's inflation target band," Gov. Kim noted. "The BOK will do its part next year by taking into account this phenomenon." (Yonhap News)
