By Kim Tong-hyung
Korean producer prices rose at the slowest pace in 10 months in October, official figures showed Thursday, which nearly assures the Bank of Korea (BOK) will leave interest rates unchanged Friday.
Prices of manufactured goods increased 5.6 percent from a year earlier, a dip from September’s 5.7 percent increase and representing the lowest level since December 2010’s 5.3 percent gain, thanks to a steady decline in food and fuel costs, according to the central bank’s report.
The BOK’s rate-setters are widely expected to maintain the country’s policy rate at 3.25 percent for the fifth consecutive month.
Despite the soaring costs of living and historically high household debt, heightened uncertainties surrounding the global economy had dissuaded policymakers from increasing borrowing costs.
Now with inflation beginning to show signs of cooling, the discussions at Friday’s monetary policy meeting will likely be short and unanimous.
Consumer price inflation was measured at 3.9 percent in October, falling below the government’s 4 percent target for the first time this year, and the subduing costs of factory goods provide further hope that the air is beginning to escape from price pressures.
However, the increasing household bills for utilities and transportation and dearer imported goods, affected by the sliding value of the local currency, continue to pose challenges to price stability.
``The prices of agricultural products and fish dropped dramatically and the annual growth in Dubai crude reduced from 40 percent in September to 29 percent in October, combining to pull back the growth in producer prices,’’ said Lee Byeong-du, an official from BOK’s price statistics division.
The prices of agricultural products and fish dropped 5.3 percent year-on-year last month, with the costs of vegetables and fruit dropping 29 percent and 19.5 percent, respectively.
Prices of Dubai crude, Korea's benchmark, grew 29 percent year-on-year in October, slowing from a 40 percent gain tallied in the previous month.
Prices of factory goods rose 7.9 percent, compared to September’s 8.2 percent, while services prices rose 1.6 percent.
However, electricity, water and gas costs rose 7.4 percent last month, compared to September’s 5 percent. The Korean won fell 2.77 percent to the dollar compared with a year earlier, pushing up the cost of imported goods.