Finance minister urges all-out efforts to curb inflation

SEOUL, June 10 (Yonhap) -- South Korea should take "all possible policy measures" to tame inflation as price hikes could undercut the nation's economic recovery and hurt the livelihood of its citizens, the top economic policymaker said Friday.
His comments came just before the nation's central bank raised its key interest rate for the first time in three months in an apparent move to help the government keep inflation under control.
"Inflation is an issue that affects everything from real income and the domestic demand base to national competitiveness, employment and the ability to cope with external shocks," Finance Minister Bahk Jae-wan said at his first meeting to discuss anti-inflation measures since taking office last week.
"In particular, as inflation has close ties with the livelihoods of ordinary people, the government has to do its best (to stabilize prices)," he noted.
Bahk expressed concerns that inflation will remain at high levels "for some time," driven by demand-side pressure from rising service fees and processed food product prices.
Lingering uncertainties from outside also make it tougher for the government to get a handle on the soaring inflationary pressure, he added.
"Some say that price-stability measures have a limit in curbing price hikes in the market, but the government, for its part, still has to do its best by mobilizing all possible policy measures and make efforts to cushion any external shocks," he said.
The remarks underlined the urgency among policymakers here as the nation is gripped by a prolonged high level of prices that many experts fear could come as a drag on the nation's economic recovery going forward.
South Korea's consumer prices jumped 4.1 percent in May from a year earlier, staying over the 4 percent mark for the fifth straight month. It is much higher than the government's annual target of keeping inflation at around 3 percent.
In his inauguration speech on June 2, Bahk confirmed that his top priorities are to stabilize prices and generate jobs to allow low and mid-income people to benefit from the nation's economic recovery.
His emphasis on price stability comes just before the nation's central bank raised its key policy rate.
The Bank of Korea hiked the benchmark seven-day repo rate, dubbed the base rate, to 3.25 for June after a freeze for the previous two months, a move apparently intended to curb inflation.
Experts said that the move might be also aimed at easing inflationary pressure "preemptively" amid worries that the government will raise its major public service fees, including on electricity, during the second half of this year.
However, the rate hike, which marked the third increase this year, came in a delicate situation as a set of economic data indicates slowing momentum of the recovery despite still strong exports.