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South Korean inflation hits decade high, boosting rate hike views

South Korean inflation hits decade high, boosting rate hike views

FILE PHOTO: Women wearing masks walk in a shopping district amid the coronavirus disease (COVID-19) pandemic in Seoul, South Korea, Nov 29, 2021. (Reuters/Heo Ran)

SEOUL: South Korea's consumer inflation accelerated to a decade high in November, remaining above the central bank's 2 per cent target for an eighth straight month and boosting the case for another interest rate hike next month.

November consumer prices jumped 3.7 per cent from a year earlier, government data showed on Thursday (Dec 2), hitting the fastest growth since December 2011 and up from a 3.2per cent rise in October.

That beat a 3.1 per cent increase tipped by analysts in a Reuters survey.

Stronger inflationary pressure is fanning views the Bank of Korea (BOK) could raise interest rates at its next policy meeting on Jan 14, as the upward tick of prices proves to be more than transitory.

Last week, the BOK raised interest rates for the second time since the pandemic began and revised up its inflation outlook to 2 per cent for next year, leaving the door open for further policy tightening.

In a statement released after Thursday's data, the BOK said annual inflation could be above its 2.3 per cent forecast made just last week, as supply chain bottlenecks could last longer than expected.

"Going forward, consumer inflation will gradually slow with global oil price trend and as the effects of lower fuel tax kick in, but it is expected to exceed the bank's target level for a considerable time due to supply bottlenecks and stronger demand side pressure," the bank said in the statement.

Thursday's headline inflation reading was lifted by a 35.5 per cent surge in petroleum prices from a year earlier, and a 15 per cent spike in livestock prices.

November core CPI, which excludes food and fuel, rose 1.9 per cent from a year earlier after a 2.4 per cent rise in October.

Month-on-month inflation rose 0.4 per cent, handily beating a 0.2 per cent decline tipped in the survey.

In a separate statement on Thursday, the nation's finance minister said December inflation may be slower than November's 3.7 per cent as the oil price is expected to stabilise. 

Source: Reuters/lk

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