S. Korea revises key inflation index

South Korea's state-run statistics office said Tuesday that it has overhauled the composition and calculation of its consumer price index, a key gauge of the country's inflation, in order to better reflect price trends of key items.

Statistics Korea said it changed the base year for the calculation of the index to 2010 from the previous 2005, and the index's composition.

The revision, made every five years to maintain the accuracy of the index, is applied retroactively to January 2010, the agency said.

According to the statistics office, smartphone rates, prices of game consoles and makgeolli, or Korean rice wine, along with 40 other items were added to the basket that comprises the index.

Additionally, prices of camcorders, prices of gold rings, public phone rates, and 18 other goods and service items were excluded from the index's basket, it said.

The agency said under the revised terms, the country's consumer price index rose 4 percent year-on-year in the first 10 months of the year, compared with the 4.4 percent increase tallied earlier.

South Korea's consumer prices grew 3.9 percent from a year earlier in October, slowing from a 4.3 percent on-year gain in the previous month.

The October consumer inflation rate stayed below the upper ceiling of the central bank's 2-4 percent inflation target band for the first time this year, but inflationary pressure still lingers.

The revision came as the government and the central bank are under fire for their failure to tame consumer inflation this year.

The government and the Bank of Korea (BOK) earlier forecast that Korea's consumer prices will likely grow 4 percent this year although many private think tanks said the full-year inflation will miss the target.

The BOK froze the key rate for the fifth straight month in November on the eurozone debt crisis, but more analysts bet that the central bank may cut the key rate next year in a bid to shield the local economy from the global slowdown.

The BOK's 2012 inflation projection stood at 3.4 percent while the Organization for Economic Cooperation and Development (OECD) predicted on Monday that Korea's consumer prices will likely grow 3.6 percent next year.