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| Eo Woon-sun, a senior Statistics Korea official, gives a press briefing on consumer prices in August at the Government Complex Sejong, Friday. Yonhap |
Consumer price growth slowed down in August for 1st time this year
By Yi Whan-woo
The rising consumer prices in Korea slowed for the first time this year in August, raising hopes that inflation may have reached its peak and is now heading south.
Nevertheless, some officials and economists do not rule out the possibility of inflation accelerating again in the coming months, noting that the volatility in global oil prices, more hawkish U.S. credit tightening and other inflationary pressure risks remain high.
According to Statistics Korea, Friday, consumer prices in Korea rose 5.7 percent in August from a year earlier ― the slowest pace since January ― after accelerating to a near 24-year high of 6.3 percent in July.
"The idea of inflation peaking is plausible, assuming that prices of oil, crops and other related global variables do not reverse," Eo Woon-sun, a senior Statistics Korea official, told reporters.
The official was referring to a sharp fall in global oil prices that was attributed mainly to a slowdown in inflation during the month of August.
Prices of Dubai crude averaged $96.63 per barrel last month, down 6.3 percent from July, amid concerns that aggressive monetary tightening in major economies could slow the global economy and weaken demand for fuel.
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The August reading comes after Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho speculated that prices of staple foods would stabilize around October.
Bank of Korea (BOK) Governor Rhee Chang-yong forecast that price growth would hover around 6 percent for a couple of months before reaching its peak in October and then winding down after that.
Joo Won, deputy director of the Hyundai Research Institute, voiced a similar opinion. "Inflation was believed to be at its height in July," he said.
He added that inflation will possibly slow down more quickly than expected, noting the slowdown in August's inflation rate "was far above the estimate."
In the meantime, prices of agricultural, livestock and fisheries goods rose 7 percent year-on-year in August.
In particular, vegetable prices increased 27.9 percent, compared to a 25.9 percent spike in July in the wake of record rainfall last month.
Driven partly by eased pandemic restrictions and partly by the rising costs of oil and raw materials, the prices of personal services made the steepest year-on-year gain in over 24 years at 6.1 percent while the cost of dining out grew at a 30-year high of 8.8 percent.
Core inflation, which excludes volatile food and oil prices, rose 4 percent from a year earlier.
Under the circumstances, BOK Deputy Governor Lee Hwan-seok said during a meeting on inflation, Friday, that the inflation outlook in the short term might be influenced by lingering global economic uncertainties.
He assessed that energy prices might rebound sharply as Russia is squeezing its gas supply to Europe in retaliation for sanctions placed on it.
Hana Bank researcher Seo Jung-hoon said the U.S. Federal Reserve's aggressive rate hikes aimed at taming inflation can further weaken the Korean won, making import prices much higher and eventually extending inflation in Korea.
"It takes a month or two for the Fed's monetary policy to have an impact on consumer prices in Korea, and we should not be relieved about inflation just yet as the Fed is open to the idea of taking another giant step in its upcoming rate-setting meeting," he said.
For the second consecutive month in July, the U.S. central bank took the giant step of raising the policy rate by 75 basis points. It is committed to more rate hikes to quell the nation's highest inflation in more than 40 years. Its next rate-setting meeting is scheduled for Sept. 20 and 21.
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