Image: Reuters Berita 24 English - Consumer inflation in South Korea increased more than predicted in May to a near 14-year high, according...
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| Image: Reuters |
Berita 24 English - Consumer inflation in South Korea increased more than predicted in May to a near 14-year high, according to statistics released on Friday, bolstering the case for additional interest rate hikes.
The consumer price index (CPI) increased 5.4 percent from a year ago in May, according to Statistics Korea data, up from 4.8 percent the previous month and faster than the 5.1 percent predicted in a Reuters poll.
It even outperformed the survey's highest expectation of 5.2 percent, marking the best annual growth since August 2008 and the 14th month in a row above the central bank's 2 percent objective.
"We don't expect interest rates to rise faster as a result of today's figures, but the central bank will need to maintain its tightening stance while keeping an eye on any signs of inflation peaking around July," said Kong Dong-rak, an economist at Daishin Securities, who expects the central bank to raise rates twice more this year.
Both the governor of the central bank and the finance minister have predicted that inflation will remain above 5% for a few months. Last Monday, the Bank of Korea upped its inflation forecast for this year from 3.1 percent to 4.5 percent.
Since August of last year, the BOK has lifted policy rates by a total of 1.25 percentage points in five increments, including a 25-basis-point boost last week, and has warned of further increases to combat inflation.
The core CPI, which excludes volatile food and energy costs, increased by 3.4 percent, the most since February 2009.
