(Korea Times EDITORIAL September 6)

Curb prices ahead of Chuseok
Bolder measures are needed to rein in runaway inflation

Inflationary pressures eased somewhat in August for the first time in seven months. According to data from Statistics Korea on Friday, consumer prices rose 5.7% year-on-year last month, after hitting a 24-year high of 6.3% in July. This raises expectations that inflation has already peaked.

The statistics agency predicted that prices would stabilize if international oil and food prices – the main driver of inflation – continued their downward trend. Yet, it is still premature to lower our guard, given that the current rally is mainly due to a temporary drop in oil prices, despite high volatility in the context of the long Russian war in Ukraine.

Petrochemical prices rose 19.7% in August, after jumping 35.1% in July. However, the rapid depreciation of the Korean won against the US dollar should intensify inflationary pressures, prompting the Bank of Korea to raise its key rate. Energy prices are likely to rise again before winter as demand for natural gas is expected to rise in European countries.

More worrying is the spike in commodity prices ahead of Chuseok, the four-day fall harvest holiday beginning Friday. Agricultural commodity prices continued to soar, affected by record rainfall in August and poor harvests. Prices for agricultural products increased by 10.4 percent in August, compared to 8.5 percent in July, amid drastic increases in the prices of vegetables (27.9 percent) and fruits (9.4 percent). percent) such as pumpkin (83.2 percent), cabbage (78 percent) and cucumber (69.2 percent) on a monthly basis.

The government unveiled a package of measures to stabilize consumer prices ahead of Chuseok, releasing 230,000 tons of commodities and 65 billion won ($47.4 million) in coupons. It decided to pay out a flood relief fund ahead of schedule while offering free toll services during the Chuseok season.

More realistic measures are needed to ease the burden on people. If necessary, the government should consider releasing more state-owned products to reduce prices. The approach of Typhoon Hinnamnor will likely accelerate the price spike as it is likely to decrease the harvest of agricultural commodities. Efforts are needed to minimize the impact of the typhoon. Yet addressing the fallout from earned impairment is more urgent. The local currency closed at 1,371.4 won per US dollar on Monday, the lowest level since April 1, 2009.

The depreciation of the won widened the trade deficit and heightened fears of a capital outflow. On Monday, Finance Minister Cho Kyung-ho pledged to take preventive measures to stabilize the financial market from any negative external factors at a meeting of senior economic and financial officials. As Choo said, all possible measures should be considered, including an earned dollar swap deal with the United States. And the United States should proactively consider such an agreement as part of efforts to strengthen the alliance and partnership between the two countries.
(END)

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