Business News Asia
Inflation in South Korea rose more than expected in May to its highest level in 14 years, driven by rising global material and food costs.
The consumer price index (CPI) rose 5.4% in May from 4.8% in April, remaining above the central bank’s 2% target for the 14th consecutive month.
“We don’t expect interest rates to be raised faster because of today’s figures, but the central bank will need to keep the tightening stance while watching for any sign of inflation peaking out around July,” said Kong Dong-Rak, an economist at Daishin Securities, who expects the central bank to raise rates two more times this year.
In addition, the central bank and the finance minister said that inflation would be above 5% in the coming months. It also raised its inflation forecast for this year to 4.5% last week from 3.1% the previous week.
The BoK raised the key interest rate by a total of 1.25 points last August. This includes a 25 basis point rate hike last week, and it has warned that further rate hikes will come to fight inflation.
The core consumer price index, which excludes food and energy prices, which are prone to fluctuation, rose by 3.4%, the fastest rate since February 2009.