The Korea Herald


S. Korean inflation expected to hover above 4 percent

By 양승진

Published : April 3, 2011 - 10:28

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   South Korea's inflation is expected to remain above the 4 percent range in April due to higher oil prices and other external shocks such as the fallout from Japan's nuclear crisis, experts said Sunday.

   The country's consumer prices rose to a 29-month high last month and were far above the central bank's target, stoking expectation that the nation's central bank may raise its key rate soon.

   The consumer price index rose 4.7 percent in March from a year earlier, the fastest since October 2008.

   The figure far exceeded the upper end of the central bank's target band of 2 percent to 4 percent, and was higher than February's 4.5 percent.

   "The April growth may slow a bit from March, but higher oil prices and the impact from Japan's nuclear crisis may put pressure on consumer prices," said Lee Keun-tae, an analyst at LG Economic Research Institute.

   The South Korean government claims that farm products and slower gains in oil prices would help reduce the country's inflation.

   Prices of farm and fisheries products fell 0.8 percent last month from February, ending three consecutive months of sharp gains.

   Lim Hee-jeong, a researcher at Hyundai Research Institute, said the impact from Japan's earthquake will have a gradual impact on the economy.

   "The earthquake in Japan and its nuclear crisis will reduce supplies of fishery products, which will boost prices of the goods," she said.

   Price pressures will start easing, partly due to a strengthening won, but increased prices of oil and other raw materials will offset them, the analyst said.

   Asia's fourth-largest economy, however, has recovered from the 2008 global financial crisis.

   The economy grew 6.2 percent last year, compared with a 0.3 percent expansion in 2009 when it was hit by the global slump that followed the financial meltdown of late 2008.

   In March, the Bank of Korea raised the key interest rate by a quarter percentage point to 3 percent to tame inflation. The central bank has hiked the borrowing costs in four steps since July of last year from a record low of 2 percent.
(Yonhap News)