ID :
188721
Wed, 06/15/2011 - 10:21
Auther :
Shortlink :
https://oananews.org//node/188721
The shortlink copeid
Economic growth to put upward pressure on inflation: BOK head
(ATTN: UPDATES with BOK governor's remarks in paras 9-12)
SEOUL, June 15 (Yonhap) -- South Korea is expected to face upward inflationary pressure down the road due to the economy's sustained growth, the country's top central banker said Wednesday.
"Consumer prices are maintaining their upward trend by growing more than 4 percent, and inflation is expected to be under high upward pressure from the demand side," Bank of Korea (BOK) Gov. Kim Choong-soo said in a report to lawmakers.
The report comes as the BOK hiked the key interest rate by a quarter percentage point to 3.25 percent on Friday, the third rate increase within this year, in a bid to tame inflation. The BOK has raised the benchmark rate in five steps from a record low of 2 percent since July last year.
The central bank reiterated its focus on keeping price stability by taking into account economic and financial conditions at home and abroad.
The annual growth of consumer prices eased to 4.1 percent in May from 4.2 percent in April, but core inflation, excluding volatile oil and food prices, jumped 3.5 percent in May, the fastest expansion in 23 months.
The BOK noted the growth of core inflation is expected to surpass that of consumer inflation later this year, indicating that price pressure from the demand side will increase.
"Demand-pull inflationary pressure is likely to mount and core inflation will likely maintain its upside trend down the road," the report said.
Last week, the governor said the BOK's emphasis on core inflation aims to prevent inflationary pressure from becoming chronic.
The rate increase came as snowballing household debt is becoming a headache for policymakers. The rising interest rate is feared to hurt households' capacity to service debt, but a delay in the timing of a rate hike also aggravates households' indebtedness by spurring loan demand.
Gov. Kim said he does not agree with the view that the BOK is behind the curve in raising the key interest rate.
"The BOK has been raising the policy rate in a bid to tame inflation and it needs to normalize the rate in order to curb rising household debt," Kim said.
The governor said the International Monetary Fund suggested that the neutral level of Korea's key rate is around 4 percent, adding that the BOK holds a similar view.
In the first quarter, the Korean economy grew 1.3 percent from three months earlier, up from a 0.5 percent on-quarter expansion in the fourth quarter.
It added that the BOK plans to strengthen its efforts to stabilize the financial markets down the road.
The BOK said it will beef up its monitoring of the financial markets in a bid to check the impact of the savings bank crisis. It will also carefully watch the development of the eurozone debt crisis due to the potential expansion of cross-border capital movement.
If necessary, the report added, the central bank and the government will cooperate to draw up additional steps to stem excessive cross-border capital flows.
sooyeon@yna.co.kr
SEOUL, June 15 (Yonhap) -- South Korea is expected to face upward inflationary pressure down the road due to the economy's sustained growth, the country's top central banker said Wednesday.
"Consumer prices are maintaining their upward trend by growing more than 4 percent, and inflation is expected to be under high upward pressure from the demand side," Bank of Korea (BOK) Gov. Kim Choong-soo said in a report to lawmakers.
The report comes as the BOK hiked the key interest rate by a quarter percentage point to 3.25 percent on Friday, the third rate increase within this year, in a bid to tame inflation. The BOK has raised the benchmark rate in five steps from a record low of 2 percent since July last year.
The central bank reiterated its focus on keeping price stability by taking into account economic and financial conditions at home and abroad.
The annual growth of consumer prices eased to 4.1 percent in May from 4.2 percent in April, but core inflation, excluding volatile oil and food prices, jumped 3.5 percent in May, the fastest expansion in 23 months.
The BOK noted the growth of core inflation is expected to surpass that of consumer inflation later this year, indicating that price pressure from the demand side will increase.
"Demand-pull inflationary pressure is likely to mount and core inflation will likely maintain its upside trend down the road," the report said.
Last week, the governor said the BOK's emphasis on core inflation aims to prevent inflationary pressure from becoming chronic.
The rate increase came as snowballing household debt is becoming a headache for policymakers. The rising interest rate is feared to hurt households' capacity to service debt, but a delay in the timing of a rate hike also aggravates households' indebtedness by spurring loan demand.
Gov. Kim said he does not agree with the view that the BOK is behind the curve in raising the key interest rate.
"The BOK has been raising the policy rate in a bid to tame inflation and it needs to normalize the rate in order to curb rising household debt," Kim said.
The governor said the International Monetary Fund suggested that the neutral level of Korea's key rate is around 4 percent, adding that the BOK holds a similar view.
In the first quarter, the Korean economy grew 1.3 percent from three months earlier, up from a 0.5 percent on-quarter expansion in the fourth quarter.
It added that the BOK plans to strengthen its efforts to stabilize the financial markets down the road.
The BOK said it will beef up its monitoring of the financial markets in a bid to check the impact of the savings bank crisis. It will also carefully watch the development of the eurozone debt crisis due to the potential expansion of cross-border capital movement.
If necessary, the report added, the central bank and the government will cooperate to draw up additional steps to stem excessive cross-border capital flows.
sooyeon@yna.co.kr
