Consumer prices rose at slowest pace in a year last month

The Korea Times

The Korea Times

Finance

Tue, September 26, 2023 | 09:36

Economy

Consumer prices rise at slowest pace in March

Posted : 2023-04-04 15:56

Updated : 2023-04-05 15:57

Kim Bo-kyung, a senior official at Statistics Korea, speaks during a press briefing on consumer prices in March at Government Complex Sejong, Tuesday. Yonhap

By Yi Whan-woo

Consumer prices in Korea increased 4.2 percent year-on-year last month, growing at the slowest pace in a year, led by a fall in petroleum product prices in the face of declining global oil prices, Statistics Korea said Tuesday.

But global oil prices are still capable of influencing inflation here, the government agency cautioned, citing an announcement by OPEC on Sunday of a plan to cut crude production by more than 1 percent of global supply in a bid to hike prices.

It added that core inflation, which excludes volatile food and energy prices, advanced 4.8 percent year-on-year, staying above headline inflation for the first time in more than two years.

"It can be said that overall consumer prices can bounce back if global oil prices turn volatile amid upward pressure on core inflation," Statistics Korea said.

Prices of petroleum products retreated 14.2 percent from a year earlier, while utility costs went up 28.4 percent year-on-year.

Over the same period, prices of agricultural, fisheries and livestock products climbed 3 percent, while industrial product prices went up 2.9 percent.

Prices of services increased 3.8 percent due to higher insurance and housing management costs, while prices of daily necessities ― 144 items closely related to people's everyday lives, such as food, clothing and housing ― gained 4.4 percent.

In a separate announcement, the Ministry of Economy and Finance projected headline inflation to display a downward trajectory.

It noted that the March reading comes after consumer prices fell to the 4 percent range in February after hovering above 5 percent for a number of months.

The ministry, however, warned that high core inflation continues to leave uncertainties for the economy amid speculation that last month's consumer prices would bolster market confidence that the credit tightening cycle is over.

The Bank of Korea (BOK) froze the benchmark interest rate at 3.5 percent in March after a year of successive interest rate hikes. Its upcoming rate-setting meeting is scheduled for April 11.

BOK Governor Rhee Chang-yong said recently that a possible rate freeze assumes that global oil prices will stay in a range of $70 to $80 per barrel throughout 2023, and that the rate can be raised if oil prices go higher.

Lee Sang-ho, head of the economic policy team at the Korea Economic Research Institute (KERI), said utility costs remain as a variable for upward pressure on inflation, pointing out that a 28.4 percent year-on-year increase marks the highest level seen since 2010 when the government began compiling related data.

"The government is temporarily preventing electricity and gas prices from increasing in order to lessen the negative impact on people's livelihoods, but that policy can't last long as state-run energy firms are struggling with snowballing debts," he said.

yistory@koreatimes.co.kr