SEOUL, September 02 (AJP) - South Korea's consumer inflation is expected to ease in September as a telecom-related base effect fades, but underlying price pressures are likely to remain elevated, the Bank of Korea said Wednesday.
The central bank made the assessment after an inflation review meeting chaired by Deputy Governor Lee Ji-ho earlier in the day. Consumer prices rose 3.1 percent in August from a year earlier, accelerating from 2.8 percent in July.
"Consumer price inflation is expected to be lower in September than in August as the base effect disappears, but the underlying upward trend is expected to continue, particularly in core items," Lee said.
The BOK said the acceleration in August was largely driven by a base effect stemming from large discounts on mobile service charges a year earlier.
Core inflation, which excludes food and energy, climbed to 3.4 percent in August from 2.6 percent in July as the telecom effect pushed up public-service prices.
Public-service prices rose 6.5 percent from a year earlier, sharply higher than the 1.4 percent increase recorded in July. Mobile-phone charges jumped 26.8 percent.
Price pressures also remained firm in other core categories.
Personal-service prices rose 3.5 percent, unchanged from July, while durable-goods inflation accelerated to 4.1 percent from 3.9 percent.
The increase in headline inflation was partly offset by slower petroleum-price growth and falling agricultural, livestock and fisheries prices.
Petroleum-product prices rose 14.2 percent from a year earlier in August, slowing from a 15.5 percent increase in July as the effect of lower government-imposed price ceilings continued.
Agricultural, livestock and fisheries prices fell 2.6 percent after rising 0.9 percent in July, reflecting lower vegetable prices and slower increases in livestock prices.
Agricultural prices dropped 6.7 percent, with vegetable prices falling 9.7 percent. Livestock prices rose 1.5 percent, slowing from a 4.4 percent increase in July.
The BOK said government discount programs for agricultural and fisheries products also helped contain overall price pressures.
The cost-of-living index, which tracks 144 frequently purchased items that account for a relatively large share of household spending, rose 3.2 percent in August. That compared with a 2.5 percent increase in July.
Consumer inflation expectations for the next 12 months remained at 2.7 percent for a second consecutive month.
The BOK said the temporary telecom effect should fade in September, pulling headline inflation lower from the August level.
Still, the central bank warned that inflation could remain elevated, particularly in core categories, amid continued uncertainty surrounding the conflict in the Middle East.
It also cited the pass-through of earlier cost shocks and the possibility of stronger demand-side pressure as factors that could sustain underlying inflation.
The BOK said it would continue to closely monitor price developments with heightened vigilance.
AJP Takeaways
August consumer inflation accelerated to 3.1 percent, largely reflecting a base effect from mobile service discounts a year earlier.
The BOK expects headline inflation to ease in September, while underlying price pressures remain firm, particularly in core categories.
Lower agricultural prices and slower petroleum-price growth offset some of the increase, while services and durable-goods prices continued to rise.
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