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By Lee Min-hyung
Consumer prices here soared again in October for the first time in three months on public utility cost hikes despite a slowdown in external supply pull factors ― such as oil and agricultural good prices ― Statistics Korea said Wednesday.
According to data from the authority, Korea's consumer prices rose by 5.7 percent from a year ago. The figure reached its peak at 6.3 percent in July, but slowed down for the next two months at 5.7 and 5.6 percent, respectively.
A senior official at the agency said that soaring bills in electricity, water and gas ended up raising the prices even amid the decrease in the prices of agricultural products and oil last month.
"Petroleum and agricultural products are two key factors triggering overall price hikes from the external supply side, but the rise in both of the prices has shown signs of slowing down," Eo Woon-sun, a senior official at Statistics Korea, said. "The chances of the two prices rallying back again appear slim from a neutral perspective."
The agency also forecast that consumer prices peaked in July.
"We expect the prices not to reach higher than the 6-percent range again when taking multiple price trends into account," the official said.
Data from the agency showed that public utility prices soared by 23.1 percent last month, the highest since the agency started compiling data since January 2010. But prices of petroleum products and agricultural products increased by 10.7 and 5.2 percent, respectively, down 5.9 and 1 percentage point from a month earlier.
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| Eo Woon-sun, a senior Statistics Korea official, speaks during a briefing on consumer prices in October at the Government Complex Sejong, Wednesday. Yonhap |
Economists said that the rise in prices would maintain a 5-percent level until the first half of 2023 on base effects.
"Our forecast is that prices will gradually fall from the second half of next year on statistical base effects and the outlook on oil prices," Korea Capital Market Institute economist Kang Hyun-ju said.
He said that the price trend has not made any drastic changes for the past few months, so external uncertainties will determine the future course of prices here.
"We need to keep paying attention to such factors as domestic consumption, prices in service sectors, oil price trends and the won-dollar exchange rate," he said.
Some others, however, expected the prices to top around the 5-percent level throughout 2023.
"The Bank of Korea (BOK) will not be able to push ahead with an aggressive set of rate hikes due to escalating fears of corporate bankruptcy sparked by the latest scandal of a Legoland developer's default on debt payment in Gangwon Province," Kim Dae-jong, a professor of business administration at Sejong University, said.
"The central bank was expected to take another big step of increasing its key rate by 50 basis points during this year's last rate-setting meeting in late November, but it appears tough for the authority to do so amid heightened concerns over marginal firms," he said.
The BOK also forecasted consumer prices to be over the 5-percent range at least until the first quarter of 2023.
"We expect the prices to maintain this level until next March, as core consumer prices are rising amid the hikes in services and durable goods," BOK Deputy Governor Lee Hwan-seok said during a meeting to monitor the price trends here, Wednesday.
He said the prices face both upward and downward pressures due to multiple external uncertainties.
"The upward risk factors include the high won-dollar exchange rate and decisions by oil-producing countries to cut production, but the prices also face downward risks due to escalating pressure that could lead to a recession here and abroad," Lee said.
BOK's monetary policy board members remained poles apart over whether to make a big hike in the basic rate again amid growing fears over recession.
According to the minutes of the BOK's latest rate-setting meeting last month, six board members ― excluding Governor Rhee Chang-yong ― held a different view over the range of the next rate hike. Four of them argued that the central bank should make another big hike to tame inflation, while the two underscored the need to brace for looming recession fears by increasing the key rate in a smaller increment of 25 basis points.
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