Last month, consumer prices rose 2.0% from a year ago, the lowest increase in three years and five months. The stabilization of international oil prices led to a decrease in the increase in petroleum products, and the decline in agricultural product prices also had a major impact. Lee Chang-yong, governor of the Bank of Korea, said, “In terms of price stability, it is time to fully consider lowering the base rate.”
According to the consumer price trend announced by Statistics Korea on the 3rd, consumer prices in August rose 2.0% from a year ago. This is the lowest increase in 3 years and 5 months since March 2021 (1.9%). The inflation rate has been in the 2% range for 5 consecutive months since April of this year (2.9%).
By item, petroleum product prices rose 0.1%, significantly reducing the increase from the previous month (8.4%). The recent decline in international oil prices and the base effect of a large increase a year ago have had an impact, resulting in a smaller increase. Agricultural, livestock, and marine products rose 2.4%, of which agricultural products rose 3.6%, significantly slowing the increase from the previous month (9.0%). The Ministry of Agriculture, Food and Rural Affairs assessed, “Agricultural and livestock product prices have gradually slowed since their peak in March and are now stabilizing.” The fresh food index, which consists of 55 items including vegetables, fruits, and marine products, also rose 3.2%, significantly reducing the increase from the previous month (7.7%).
However, some fruits and vegetables continued to rise significantly. Pears jumped 120.3% and apples jumped 17.0%. Cabbage also rose 9.6% ahead of the kimchi season. Kim Beom-seok, First Vice Minister of Strategy and Finance, explained, “Summer cabbages are being shipped in earnest and the daily average volume of release is expected to increase to 700 tons, which will further improve supply conditions.” The government also forecasted that fruit prices will stabilize once fresh fruits are released. The government predicts that inflation will remain in the low 2% range going forward, unless there are additional shocks such as abnormal weather or international oil price instability.
As the inflation rate last month was equal to the Bank of Korea’s inflation target of 2.0%, there are assessments that the Bank of Korea has the conditions to cut the base rate. Governor Lee also met with reporters at the 2024 G20 World Economy and Financial Stability Conference held that day and said that it is time to consider cutting the base rate, saying, “It is time to think about the appropriate timing for how to move by looking at financial stability, etc.” He added, “In terms of price stability, (price) is going along the path we thought.”
However, the variable is that financial instability has increased as household debt has increased due to rising housing prices. Lee Jeong-hee, a professor of economics at Chung-Ang University, pointed out that “as prices are stabilizing, the rise in real estate prices and the increase in household debt could have a decisive impact on the extent of the Bank of Korea’s interest rate cut.”
Sejong = Reporter Sosulhee [email protected]
Sejong = Reporter Song Hye-mi [email protected]
Reporter Lee Dong-hoon [email protected]
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2024-09-04 04:58:44