South Korea's producer prices rose at the fastest pace in more than nine years in March on soaring oil and raw material costs, the central bank said Wednesday, reinforcing the market view that the bank will likely freeze the interest rate this week.
The producer price index, one of the barometers of future consumer inflation, grew 8 percent in March from a year earlier, picking up from a 6.8 percent on-year gain in February, according to the Bank of Korea (BOK).
The figure was the fastest annual increase since November 1998 when producer prices grew 11 percent. Compared with a month earlier, the index rose 1.7 percent last month, faster than a 1.1 percent gain the previous month.
"High-flying oil and other raw material costs pushed up prices of industrial goods," Yoon Jae-hoon, a bank official said. "If the upward trend of oil prices continues, the country's producer prices are likely to remain high." Prices of industrial products advanced 11.2 percent on-year last month, the fastest rise since November 1998 when the prices shot up 12.8 percent.
South Korea's consumer prices rose 3.9 percent in March, up from the previous month's gain of 3.6 percent. Inflation breached the BOK's target range of 2.5-3.5 percent for a four month in a row.
The price of Dubai crude, South Korea's benchmark, jumped 64.4 percent in March, compared with a year earlier. South Korea, the world's fifth-largest crude buyer, relies entirely on imports for its oil needs.
The data comes a day before the BOK holds a monthly rate-setting meeting. The BOK is widely expected to freeze the 7-day repurchase agreement rate, dubbed the base rate, to 5 percent in April for the eighth straight month as rising inflation woes outweigh growing concerns over a slowing economy.
BOK Gov. Lee Seong-tae warned of rising inflation last month, saying that inflation for the full year could be higher than the bank's previous forecast. The central bank forecast consumer prices to grow 3.3 percent this year, up from a 2.5 percent gain last year.