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| Bank of Korea Governor Lee Ju-yeol, right, speaks during a National Assembly audit in Seoul, Oct. 21. Joint Press Corps-Yonhap |
By Lee Min-hyung
The Bank of Korea (BOK) is widely expected to revise the consumer price growth forecast up to the mid-2 percent range, amid escalating inflationary fears.
The revision reflects the continued crunch from global supply chain bottlenecks and the increasing price of oil. Consumer prices here have also been affected by external uncertainties, with BOK Governor Lee Ju-yeol expressing concerns over a longer-than-expected increase in consumer prices.
In August, the central bank raised its forecast on the consumer price growth rate to 2.1 percent during a monetary board meeting. It has since maintained this outlook, but the central bank is expected to increase the figure to around 2.5 percent.
Readjusting its consumer price target is inevitable, according to economists and analysts, as the consumer price growth rate already exceeded the earlier forecast. According to data from Statistics Korea, consumer product prices here rose by 2.2 percent between January and October of this year.
The BOK chief hinted at the possibility of revising up the forecast, citing the aforementioned growing external risk factors. He also said that consumer prices would be on a path for higher-than-expected growth for the time being, due to the demand recovery and supply shortages. "The rise of consumer prices will continue for the time being amid the demand recovery and supply shortage," Lee said during a recent meeting with a group of economists.
BOK is fully set to increase its benchmark rate by 25 basis points in a November rate-setting meeting following its last meeting in August, as the situation of widening financial imbalance and the level of household debt has reached alarming levels. Korea's base rate will reach 1 percent if the BOK board decides to go ahead with a raise next week.
But the possibility of a November hike is sparking concerns that the central bank is pushing for the rate hike, at a short interval, at a time when the U.S. Federal Reserve is maintaining a near-zero rate policy.
On a related note, data released by the central bank, Friday, said that producer prices also increased by 0.8 percent to 112.21 in October from the previous month. But this amount is an increase of 8.9 percent year-on-year, and the highest yearly increase since 2008.
As producer prices put upward pressure on consumer prices, concerns are growing that the Korean economy will be come under widening inflationary pressure in the next few months.
