There is a possibility that the inflation rate will rise in the short term
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In the process of responding to the novel coronavirus infection (Corona 19), there are concerns that the liquidity solved by central banks around the world may increase inflation and inflation, the Bank of Korea assessed that the possibility of rapid inflation expansion is limited. Rather than claiming that inflation will expand due to large fiscal expenditures and liquidity expansion, the interpretation that long-term expected inflation is stable and the sluggish employment is continuing is unlikely to expand.
The BOK Financial and Monetary Committee announced on the 11th in its Monetary Credit Policy Report that “the possibility of rapid inflation expansion appears to be limited as the uncertainty of Corona 19 is still high.” However, it was believed that the inflation pressure could temporarily increase due to the economic recovery following vaccination, the normalization of economic activities, and the outflow of repressed demand.
Since the outbreak of the Corona 19 outbreak, the rate of increase in consumer prices in Korea and major countries has slowed considerably due to weakening demand-side inflation pressure and falling international oil prices. However, since June of last year, international oil prices have turned to an uptrend, and energy prices are acting as a factor that increases the rate of increase in consumer prices.
In the process of responding to Corona 19, as the impact of macro-financial policies of countries around the world is reflected in the financial markets, the financial market-based expected inflation indicators of major countries are on the rise. Even in the case of survey-based inflation expectations, the inflation expectations for the general public in Korea and the United States are on the rise. This is due to the recent increase in international raw material and food prices, as well as expectations for economic improvement from vaccinations and expanded government policies.
The BOK explained that the views are generally consistent in that the inflation rate may increase in the short term due to the outflow of demand and the base effect that were suppressed after Corona 19. However, in the mid- to long-term clock, opinions on the direction of inflation are mixed, but when combined, they concluded that the possibility of inflation expansion is limited.
/ Reporter Jo Ji-won [email protected]
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