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South Korea's inflation in August stays at 9-year peak, beating forecast

South Korea's inflation in August stays at 9-year peak, beating forecast

People wearing masks walk at Myeongdong shopping district amid social distancing measures to avoid the spread of COVID-19 in Seoul, South Korea, May 28, 2020. (File photo: Reuters/Kim Hong-Ji)

SEOUL: South Korea's August consumer inflation stayed at a nine-year peak fuelled by a continued spike in prices of fresh food due to a heat wave and the rising cost of oil products, housing rental and other services.

The consumer price index (CPI) last month rose 2.6 per cent from a year earlier, Statistics Korea said, unchanged from July and beating the 2.3 per cent increase tipped in a Reuters survey.

The 2.6 per cent rise was first seen in May, when inflation marked the fastest pace since April 2012, and continued to stay above the central bank's 2 per cent target for a fifth straight month.

Thursday's (Sep 2) data comes a week after the Bank of Korea raised its policy rate for the first time in almost three years, becoming the first major Asian central bank to shift away from pandemic-era monetary settings as ballooning consumer debt created new threats for the economy.

Breakdown of data showed continued price surge for agricultural and oil products towed the inflation, with housing rental costs and dining and other services costs further adding to the boost.

The cost of agricultural, livestock and fisheries and petroleum products jumped 7.8 per cent and 21.6 per cent, respectively, while that of housing rentals and dining rose 1.6 per cent and 2.8 per cent each.

Month-on-month CPI rose 0.6 per cent, the best reading since January and accelerating from 0.2 per cent in July. Economists had forecast a 0.3 per cent increase.

Meanwhile, core CPI rose 1.3 per cent year-on-year, marking the fastest growth since June 2018 and up from a 1.2 per cent rise in July.

The Bank of Korea pushed up its inflation projection for 2021 to 2.1 per cent from 1.8 per cent previously, and sees it standing at 1.5 per cent for the whole of 2022.

In the Reuters poll published last week, all 18 analysts who gave end-2022 forecasts saw further rate hikes next year, with a slim majority of 10 predicting the base rate at 1.25 per cent by end of next year.

Source: Reuters/ng

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