‘Recently in the 1% range’ due to the surge in international oil and agricultural products prices
“Consumption may surge when coronas calm down, but it will not continue to rise.”
BOK Governor Lee Ju-yeol expressed the view that this year’s inflation rate may exceed the original forecast, but that inflation concerns are not great. Recently, Korea’s inflation rate has risen to the 1% level due to the surge in international oil prices and agricultural and livestock prices. Governor Lee said that if the Corona 19 incident truly takes a turn, consumption may surge even if it is suppressed, but it will not result in a sustained increase in inflation.
According to the Bank of Korea on the 24th, BOK Governor Lee Ju-yeol mentioned the concerns of inflation (increased inflation) recently raised in the market at a press conference on the 23rd.
Governor Lee said, “With the increase in oil prices and a sharp rise in agricultural and livestock products in Korea, inflation concerns have been raised as consumer inflation has risen from 0% to 1%.” It is expected to increase, but it will still fall below the target level of price stabilization (2%).”
Governor Lee also viewed the base effect of a sharp drop in international oil prices in the second quarter of last year in relation to the recent increase in inflation. In the second quarter of last year, international oil prices plunged to the level in the early 30 dollars per barrel due to the spread of Corona 19. Since then, it has continued to rise until the middle of this month and has been rising and falling from the $60 range, but has been weak in the last few days.
In the second half of this year, Governor Lee predicted that the inflation rate would fluctuate around the mid- and late-mid 1% level.
He said, “In the future, if the corona infection situation quickly subsides and demand, which has been suppressed so far, erupts, inflation may temporarily increase, but it is not likely that it will continue to rise,” he said.
Regarding the real gross domestic product (GDP) growth this year, he said, “There is still uncertainty in the future growth path, but this year’s domestic growth rate is expected to be higher than the previous forecast (3.0%).”
Governor Lee cited the global economic recovery due to the expansion of macro-policies in major countries and the expansion of vaccine supply as the reasons for the possibility of economic growth that exceeded expectations. In the case of the U.S., a large-scale additional fiscal stimulus plan was finalized, and the Corona 19 vaccination was proceeding faster than planned. .
However, the BOK plans to maintain a easing monetary policy for the time being, even if the inflation rate or economic growth rate is higher than expected.
Governor Lee said, “As the real economic activity is still not reaching its potential level, it is difficult to say that our economy has recovered from the Corona 19 shock and has returned to its normal trajectory.” I am judging that it is not,” he said.
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