World Economy

S. Korea Inflation Remains Low

S. Korea Inflation Remains LowS. Korea Inflation Remains Low

A board member of South Korea's central bank said Wednesday that the country's inflation is low enough to maintain its accommodative monetary policy stance amid growing market expectations of a rate hike in the near future.

"I think the current consumer prices level is low," Cho Dong-chul, a member of the seven-member monetary policy board at the Bank of Korea, said in a press meeting at the BoK headquarters in Seoul. "The present monetary policy is not tight at all. Rather, it is probably set on an accommodative mode," Yonhap reported.

South Korea's consumer prices have been hovering around 1.5% for months, hitting 1.6% in April. In January, the figure dropped to a 17-month low of 1%, far lower than the BoK's target inflation of 2%. Core inflation, which excludes volatile oil and food prices, grew 1.4% in April on-year.

Citing the low inflation pressure, the central bank has kept the policy rate steady for months since it raised the interest rate to 1.5% in November for the first time in 6 1/2 years.

"(Core inflation) is still low," Cho said. "Many people agree that an accommodative monetary policy is necessary, although they don't make such a decision based only on inflation data." But they are mulling how long the current accommodative policy should be maintained, he noted.

Meanwhile, the South Korean economy is on a firm growth trajectory under the (President) Moon Jae-in government, but a dire job market situation, coupled with controversy over the effects of a raft of new economic policies, is posing daunting challenges for the liberal government that took office a year ago.

South Korea's economic growth accelerated last year on the back of robust exports amid a global economic recovery. The nation's economy expanded 3.1% in 2017 from a year ago, when it grew 2.8%, marking the first time since 2014 that Asia's fourth-largest economy grew by more than 3%.

For this year, the economy is widely expected to expand by 3% on continued domestic demand recovery and robust exports.

Outbound shipments have been the main pillar of the economy for years, with the total reaching an all-time high of $573.9 billion for 2017, surging from $495.4 billion a year earlier, fueled by an upturn in global demand. The total is the largest annual export tally since the country started compiling such data in 1956.

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