Rate hike talks too early amid accelerating inflation: senior official

Supermarket in South Korea (Yonhap)

Consumer prices in South Korea have recently accelerated, but it is too early to say that the country’s economy is sufficiently overheated to warrant a rate hike, a senior government official said on Thursday.

First Deputy Finance Minister Lee Eog-weon said inflation growth accelerated in March and April largely due to a weak base effect compared to last year, when inflationary pressure had remained subdued in the midst of the pandemic.

Lee told a radio show that it appears to be too early to judge that the country needs a rate hike or that Asia’s fourth largest economy is overheating.

Global inflation fears intensified as US consumer prices climbed 4.2% year-on-year in April, the fastest in nearly 12 years.

Consumer prices in South Korea rose 2.3% in April from a year earlier, the fastest annual gain in nearly four years, as prices for agricultural and petroleum products rose.

Policymakers said inflation is likely to pick up in the second quarter mainly due to the lower base effect and high prices for agricultural and petroleum products.

Last month, the Bank of Korea (BOK) froze its key interest rate at a record 0.5% amid fears of a new wave of infections. The BOK aims to keep inflation at 2% over the medium term. (Yonhap)

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