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Consumer prices jump 6% y/y in June, hitting near 24-year high Updated: 2022-07-05 13:41:04 KST

Consumer prices in South Korea last month rose by 6 percent compared to a year earlier, the biggest increase in nearly 24 years.
Much of this is due to geopolitical factors, so it doesn't seem like there's much policymakers can do.
But it does make a bigger interest rate hike more likely this month.
Shin Se-byuck reports.

South Korea s consumer prices rose at the fastest pace in almost 24 years in June due to high energy and food costs.
Data from Statistics Korea on Tuesday shows consumer prices soared six percent from the same month last year
That's the largest jump since November 1998 during the Asian financial crisis.

The June figure marks the 15th consecutive month that the index has risen by more than 2 percent, which is the central bank s inflation target over the medium term.
The rapid surge comes on the back of soaring energy, food, and raw materials prices.

By category,
Livestock prices shot up 10.3 percent on-year, with imported beef rising by around 27 percent, and chicken and pork up by around 20 percent.
The cost of insurance was up almost 15 percent, rent climbed almost three percent, and the costs of dining out jumped eight percent.

Petroleum product prices saw an average of almost 40 percent increase with gasoline jumping 50 percent, and diesel and LPG rising around 30 percent.
To ease the burden of high energy prices, the government is rolling out several measures including cutting the fuel tax to the legal cap of 37 percent.
But the latest hikes in electricity rates and natural gas prices are feared to lead to further inflation.

So what can the government do to put a cap on prices?

"It can limit wage increases which can further increase prices through the wage-price spiral. And we can try to keep the expected inflation expectations of future inflation low so that when the oil prices and grain prices come back down as it eventually must then it will be easier to control the inflation when grain and oil prices come down."

Due to geopolitical uncertainties, Statistics Korea said consumer price increases are at a high risk of reaching even 7 or 8 percent. and that annual inflation could exceed the 4.7 percent forecast by the Finance Ministry.

To tame mounting inflationary pressure, some experts even predict that the Bank of Korea might raise interest rates by a "big-step" of 50 basis points this month.

Shin Se-byuck, Arirang News.
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