South Korea`s consumer price index edged up 1.4 percent last month from a year earlier on a rise of agricultural goods and the service sector, but it decelerated from the previous month`s 1.5 percent on-year gain, weakening the case for the country’s central bank to tighten monetary policy.

According to Statistics Korea on Tuesday, the country’s consumer price index (CPI) in August rose 1.4 percent from a year earlier, staying below the 2.0 percent target range for 11 months in a row. The last time the headline inflation stayed at below 2 percent this long was between November 2012 and December 2016.

The Korean central bank stuck in a policy dilemma with job and demand conditions deteriorating at home pushed back its interest rate hike last Friday despite the widening rate gap with the U.S. The bank’s policy rate has stayed at 1.5 percent since last November, below the U.S Federal Reserve’s target range of 1.75-2.00 percent.

In August, prices of agricultural, livestock and fishery products gained 3.5 percent on year and bumped up the headline inflation by 0.3 percentage point as unusually lengthy and sizzling heat wave hurt crop yields. Agriculture prices jumped 7.0 percent and fishery prices were up 6.0 percent on year.

Petroleum-related prices soared 12.0 percent on year and lifted up the CPI by 0.52 percent due to rising global oil prices. Diesel prices shot up 13.4 percent and gasoline 11.0 percent.

Utility charges, however, fell 8.9 percent on year after the government introduced a temporary cut in residential electricity charges for the peak summer period to lessen the burden on households during the country’s hottest summer in 111 years. Electricity charges fell 16.8 percent on year, bringing down the CPI by 0.28 percentage point.

The statistics agency estimated the August CPI would have gained 1.7 percent on year without the electricity charge cut.

The index for everyday expenses reflecting spending on staple food and utility fees grew 1.3 percent on year, with the fresh food index up 3.2 percent. Core inflation, which excludes volatile oil and farm products, climbed 0.9 percent. The CPI without food and energy, the standard by the Organization for Economic Cooperation and Development rose 1.0 percent on year.

By Lee Yu-sup and Cho Jeehyun

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