South Korea’s consumer price rose 1.4 percent on year in February, accelerating from 1.0 percent gain in the previous month primarily due to strong food prices from unseasonably lengthy frosty weather.
According to the Statistics Korea on Tuesday, the nation’s consumer price index (CPI) gained 1.4 percent from a year earlier as fresh food prices jumped not only from the supply end due to weather conditions, but also higher demand for the Lunar New Year’s holiday, one of the biggest family gatherings in Korea.
The headline inflation still remains fairly steady with the figure hovering above 1 percent but below 2 percent for the fifth straight month, giving grounds for the Bank of Korea (BOK) to hold off hike regardless of the tightening pace in the United States.
The domestic market turned long despite the widely-expected 25-basis-point hike in the Federal Reserve meeting this month, which would place the U.S. federal fund rates between 1.50 percent and 1.75 percent and above Korea’s 1.50 percent.
New Fed chair Jerome Powell in his confirmation hearing indicated a hike in each quarter to deliver four increases this year, given the solid labor data and inflationary pressure.
Investors however turned attention to the rare reappointment of Bank of Korea Governor Lee Ju-yeol, who has delivered just one increase in November during his four-year term.
Extending a second term - which was the first case in BOK history since the governor chaired the monetary policy board in 1988 - to a dovish figure underscores the government wishes for an accommodative monetary policy against fragile economic conditions.
Finance minister Kim Dong-yeon on Monday met with Lee whose reappointment was announced on Friday, and the two agreed to keep fiscal and monetary policies in sync to protect the economy against the ills of increasing protectionist actions on the trade front.
The three-year government bond yield finished Tuesday 0.1 basis points higher 2.312 percent and the 10-year paper 2.2 basis points higher at 2.759 percent, undisturbed by the inflation data.
Price of agricultural products soared 7.4 percent on year and pushed up the headline index by 0.34 percentage points as supplies were hurt by unusually cold weather. Vegetable prices jumped 3.7 percent on year and fruit prices up 5.1 percent.
Service charges including rent prices and personal and public service charges gained 1.7 percent and drove up the headline inflation by 0.9 percentage point. Utilities charges, however, fell 1.5 percent on year and lowered the overall CPI fall by 0.06 percentage point.
The index for everyday expenses reflecting spending for stable food and utility fees added 1.4 percent on year, growing from 0.8 percent in the previous month, as higher minimum wage translated into prices.
The core inflation excluding volatile oil and farm produces rose 1.2 percent on year and the CPI without food and energy, the standard by the Organization for Economic Cooperation and Development (OECD) was up 1.3 percent. But figures remained roughly the same as January when it marked 1.1 percent and 1.2 percent on-year gain, respectively.
By Lee Yu-sup and Cho Jeehyun
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]