Devastating floods make people's lives harder
One of the most daunting tasks Korea faces now is how to tame runaway inflation. The Yoon Suk-yeol administration needs to do all it can to regain price stability, particularly ahead of Chuseok, the autumn harvest holiday set for Sept. 9 to 12. It cannot keep its promise to improve people's lives without easing mounting inflationary pressure effectively.
Last week's record rainfall has made matters worse. Prices of farm products such as cabbages and onions are going up sharply. The inflationary trend is likely to continue until after Chuseok, one of the nation's two largest holidays. The poor and underprivileged are forced to bear the brunt of huge flood damage on top of soaring inflation and higher interest rates.
That's why the Yoon administration has decided to take a set of measures to stabilize prices. On Friday, the government announced a plan to supply a combined 230,000 tons of 20 key foodstuff items, including farm, livestock and fisheries products for three weeks before the Chuseok holiday. It also plans to lower or exempt tariffs on more food items so as to bring down consumer prices.
Those steps came after consumer prices skyrocketed 6.3 percent year-on-year in July, the steepest rise since November 1998. The figure was higher than the 6 percent recorded in June. It marked the first time in almost 24 years that the inflation rate has stayed above 6 percent for two months in a row. The upsurge was attributed to high energy and food prices in global markets.
More worrying is that there are no signs of inflation easing anytime soon. Finance Minister Choo Kyung-ho said that inflation may peak no later than October if there is no surge in global oil and grain prices. In a nutshell, South Korea is likely to continue to see inflationary pressure rising for the time being, although consumer prices in the U.S. went up at a slower pace of 8.5 percent in July after hitting a four-decade high of 9.1 percent in June.
Against this backdrop, the inflation rate is forecast to surpass 7 percent next month in the aftermath of the flood disaster. Now is the time for the authorities to mobilize all possible means to facilitate disaster relief to help victims return to their normal lives as soon as possible. At the same time, they should step up efforts to stem a further rise in the prices of key consumer items.
The Bank of Korea has continued to raise its benchmark interest rate to fight inflation since August 2021. As everyone knows, preemptive action is required to stabilize prices. But it is also true that higher interest rates inevitably increase the debt-serving burden on borrowers, stifling consumption and raising fears of stagflation. Thus, it is necessary to take a flexible attitude in order not to sap the growth momentum, while keeping inflation in check.
One of the most daunting tasks Korea faces now is how to tame runaway inflation. The Yoon Suk-yeol administration needs to do all it can to regain price stability, particularly ahead of Chuseok, the autumn harvest holiday set for Sept. 9 to 12. It cannot keep its promise to improve people's lives without easing mounting inflationary pressure effectively.
Last week's record rainfall has made matters worse. Prices of farm products such as cabbages and onions are going up sharply. The inflationary trend is likely to continue until after Chuseok, one of the nation's two largest holidays. The poor and underprivileged are forced to bear the brunt of huge flood damage on top of soaring inflation and higher interest rates.
That's why the Yoon administration has decided to take a set of measures to stabilize prices. On Friday, the government announced a plan to supply a combined 230,000 tons of 20 key foodstuff items, including farm, livestock and fisheries products for three weeks before the Chuseok holiday. It also plans to lower or exempt tariffs on more food items so as to bring down consumer prices.
Those steps came after consumer prices skyrocketed 6.3 percent year-on-year in July, the steepest rise since November 1998. The figure was higher than the 6 percent recorded in June. It marked the first time in almost 24 years that the inflation rate has stayed above 6 percent for two months in a row. The upsurge was attributed to high energy and food prices in global markets.
More worrying is that there are no signs of inflation easing anytime soon. Finance Minister Choo Kyung-ho said that inflation may peak no later than October if there is no surge in global oil and grain prices. In a nutshell, South Korea is likely to continue to see inflationary pressure rising for the time being, although consumer prices in the U.S. went up at a slower pace of 8.5 percent in July after hitting a four-decade high of 9.1 percent in June.
Against this backdrop, the inflation rate is forecast to surpass 7 percent next month in the aftermath of the flood disaster. Now is the time for the authorities to mobilize all possible means to facilitate disaster relief to help victims return to their normal lives as soon as possible. At the same time, they should step up efforts to stem a further rise in the prices of key consumer items.
The Bank of Korea has continued to raise its benchmark interest rate to fight inflation since August 2021. As everyone knows, preemptive action is required to stabilize prices. But it is also true that higher interest rates inevitably increase the debt-serving burden on borrowers, stifling consumption and raising fears of stagflation. Thus, it is necessary to take a flexible attitude in order not to sap the growth momentum, while keeping inflation in check.
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