The Bank of Korea appears to be facing a dilemma ahead of its rate decision in January, as producer and consumer prices soar in defiance of anemic growth.

Producer prices in November hit a record high, up 0.5 percent on-month and 9.6 percent on-year. The prices have been on a steady rise since November 2020, the longest since May 2011, when they ended a 19-month rally.

“The base effect makes the (price) rises look worse than what they actually are. In November last year, oil and raw material prices were lower (than the year before). This year they all jumped,” the Bank of Korea said.

Petroleum and metal products led the record rise this year, with food prices like vegetables marking a steep increase. Cucumber prices rose 125 percent on-year.

Meanwhile, consumer prices also accelerated 3.7 percent in November, the biggest rise since 2011. The hike, owing to the pandemic recovery, is higher than 2 percent the central bank sees as fitting to carry out a balanced monetary policy.

“The consumer prices have gone a little loose from our target range for some time and we expect them to go on like that next year,” Bank of Korea Gov. Lee Ju-yeol said, describing soaring inflation as depreciating households’ purchasing power and blocking sustainable growth.

Household debt, which saw a brief sign of slowing in the early 2000s, has been growing for the past 16 years, though loan curbs are seen as putting a stop to the growth trajectory.

Concerns over a benchmark rate hike are growing because the hike would slow economic activity even more and suspend growth, as the country is still riding out the latest omicron variant and supply bottlenecks.

The state-run Korea Development Institute said a rate hike of 25 basis points could knock as much as 0.15 percentage point off the country’s GDP growth, saying pandemic fears were still gripping the financial markets.

Lee has reiterated that he would normalize monetary policy to pre-pandemic levels, though he refrained from spelling out whether a rate hike would take place in January or February.

Sung Tae-yoon, an economics professor at Yonsei University, said the central bank would have to forge ahead with a hike. “It’s unavoidable given the inflation and the US Fed’s sooner-than-expected tapering.”

A week earlier, US Federal Reserve Chairman Jerome Powell said the US economy no longer needs “increasing support” provided by bond purchases, after he convened the latest central bank policy meeting.