Liquidity provided by South Korean financial firms reached almost 2,000 trillion won ($1.79 trillion) in November, central bank data showed Thursday, adding to growing risks of higher inflation.
The country's liquidity provided by local depository agencies totaled an outstanding 1,982 trillion won in November, up 7.7 percent from the previous year, according to data from the Bank of Korea (BOK).
To fight the global financial turmoil, the central bank supplied ample liquidity to the financial system. Low borrowing costs, driven by the BOK's aggressive rate cuts, and robust exports added to liquidity, raising concerns about higher inflation.
"Liquidity unleashed during the global financial turmoil remains ample even as (we) are calling in part of it amid the economic recovery," said an official at the BOK. "Excessive liquidity could lead to raising inflation risks."
BOK Gov. Kim Choong-soo said Wednesday that South Korea is facing very difficult situations in taming inflation.
The central bank said consumer inflation is expected to grow in the mid-3 percent range for a considerable amount of time this year, propelled by mounting demand-pull inflationary pressures and rising raw material prices. An upturn in wages and inflation in China is feared to put upward pressure on Korea's prices, it added. (Yonhap)