South Korea’s consumer prices stayed below 1 percent in July for the seventh straight month due to low international oil prices and the fall in agricultural prices, supporting the rationale for more rate cuts by the central bank to fight back the stubbornly low inflation and slow economic growth.

According to Statistics Korea on Thursday, the country’s benchmark consumer price index (CPI) in July added 0.6 percent to 104.56 from the previous year. This is a retreat from a 0.7-percent gain in the previous month and further below the Bank of Korea’s 2% inflation target.

The CPI kept subdued in the zero territory since the beginning of this year. It is the longest stay since 2015 when the index had not broken out of the range for 10 consecutive months.

The government said the prolonged weak inflation, not deflation, is due to external factors such as falling international oil prices and a decrease in agricultural and livestock prices, rather than weak domestic demand.

Under pressure from the persistently low inflation, the central bank at the latest monetary policy meeting on July 18 shaved the policy rate by 25 basis points to 1.50 percent, not waiting for an anticipated easing from the U.S. Federal Reserve.

Petroleum product prices lost 5.9 percent on year, dragging down the headline inflation by 0.27 percentage point.

Industrial goods prices remained unchanged, and prices of agricultural, livestock and fishery products fell 0.3 percent on year due largely to a 6.4 percent price drop in vegetables such as onion (down14.6 percent), garlic (down 15.3 percent) and radish (down 27.5 percent).

The index for everyday expenses reflecting spending for staple food and utility fees added 0.4 percent in July, with food prices up 1.1 percent. The fresh food index including vegetables, fruits, and fish declined 1.6 percent from a year earlier.

The CPI without food and energy, the standard by the Organization for Economic Cooperation and Development (OECD), rose 0.9 percent on year, and core inflation excluding volatile agricultural product and oil prices also gained 1.0 percent from the previous year.

By Kim Tae-joon and Lee Ha-yeon

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