Home Interest rate Inflation in December at 3.7%, 2021 rate at decade high at 2.5%

Inflation in December at 3.7%, 2021 rate at decade high at 2.5%

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SEOUL, Dec.31 (Reuters) – South Korea’s annual inflation has exceeded the central bank’s current forecast this year and has hit a decade-high, proving to policymakers that prices are on the rise difficult to control and argue in favor of another interest rate hike in 2022.

The average consumer inflation rate for the whole year jumped to 2.5%, the fastest since 2011 and from 0.5% in 2020, government data showed on Friday.

This exceeds the Bank of Korea’s 2.3% projection made in November.

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December consumer prices jumped 3.7% from a year earlier, slowing slightly from a decade high of a 3.8% rise in November and beating a gain of 3, 6% according to a Reuters survey. Read more

The rebound in service spending and persistent supply disruptions underpin inflationary pressures in Asia’s fourth-largest economy and fuel the view that the BOK may raise interest rates at its next policy meeting on January 14.

On November 25, the BOK raised its interest rates (KROCRT = ECI) for the second time since the start of the pandemic to 1.00% and revised its inflation outlook upwards as concerns about the household debt increased and consumer prices were rising. Read more

An index measuring service costs rose 2.6% year-over-year in December after gaining 2.4% a month earlier, while fresh food prices jumped 6.7% after an increase of 5.6% in November.

(This story corrects the year until 2022 in the first paragraph)

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Reporting by Cynthia Kim, Jihoon Lee Editing by Chris Reese and Sam Holmes

Our Standards: Thomson Reuters Trust Principles.


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