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| ▲ First Vice Finance Minister Lee Eog-weon (2nd from R) presides over a meeting of related vice ministers to check consumer prices at the government complex in Seoul on Feb. 18, 2022, amid escalating tensions between Russia and Ukraine. (Yonhap) |
BOK-inflation
Higher inflation may be prolonged amid soaring energy prices: BOK
SEOUL, March 10 (Yonhap) -- South Korea's central bank said Thursday that it cannot rule out the possibility of inflation running high for a longer period due to sky-high energy prices that could further rise amid heightened geopolitical risk from Ukraine.
In a report submitted to the National Assembly, the Bank of Korea (BOK) also said that the country's exports growth could slow slightly this year due to continued global supply chain disruptions but the impact of the ongoing war in Ukraine will not be significant in affecting its global sales.
"In the case that inflation is running higher than our target range and the sentiment for inflation expectations get unstable, we cannot rule out the possibility of inflation staying high for a long period of time due to interaction between income and prices," the report said.
"The possibility is high that (our economy) can be exposed to upward risks on prices, such as a spike in energy prices caused by the Ukraine standoff and strong food costs," it added.
The report noted that upward inflation pressure from global supply disruptions could ease as the pandemic subsides but a reshuffle in the global value chains could drive prices up in a structural manner going forward.
Consumer prices, a major gauge of inflation, jumped 3.7 percent on-year in February, the fifth straight month that prices have grown over 3 percent. It surpassed the BOK's objective to keep inflation at 2 percent.
Inflation pressure has been on the rise as the ongoing war in Ukraine has sent already sky-high crude and commodity prices further soaring, weighing on South Korea's economy that depends mostly on imports for energy needs.
Reflecting the latest economic conditions at home and abroad, the central bank recently revised sharply upward its inflation outlook for this year from 2 percent to 3.1 percent.
The report also said that global supply disruptions will continue to weigh on the country's exports this year but the geopolitical tensions emanating from Ukraine might be "limited" as its dependence on the region for its exports remains insignificant.
"But should the geopolitical risk persist and cause growth in the European Union to slow, it can have a negative impact on the aspect of global imports," the report said.
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