South Korea’s consumer price index rose 4.1 percent in March, the highest rate in a decade, up from 3.7 percent in February, government data showed on Tuesday.
The 4.1 percent increase is the highest since December 2011, when prices surged 4.2 percent year-on-year, Yonhap News Agency (YNA) reported, citing data from Statistics Korea.
The statistics agency said the inflation rate increased as the Russia-Ukraine crisis fueled surging oil and energy costs.
“There are concerns that price pressure could further rise due to the Ukraine crisis. For the time being, the possibility that inflation growth will sharply slow is not high,” Ee Woon-sun, a Statistics Korea spokesperson, told YNA.
The core inflation rate, which excludes volatile food and energy prices, rose 2.9 percent compared to the previous year. Petroleum prices increased 31.2 percent year-on-year in March, while agricultural, livestock, and fisheries prices surged 0.4 percent in March.
Prices of processed foods grew 6.4 percent year on year in March, the sharpest rate of growth since April 2012, while prices of daily essentials gained 5 percent.
The Bank of Korea (BOK) warned that inflation will continue to rise and that the consumer price index could far exceed the outlook of a 3.1 percent rise presented in February.
“Going forward, consumer prices will likely stay over 4 percent for the time being as crude, grain and other commodity prices are rising in the wake of the Ukraine crisis,” the central bank said.
The country’s finance minister Hong Nam-ki said that the government will expand fuel tax cuts from the current 20 percent to 30 percent until July to mitigate the impact of rising energy prices caused by the Russia-Ukraine crisis.
On Monday, BOK senior deputy governor Lee Seung-heon said that this month’s policy review would be challenging due to the twin risks of higher inflation and downward pressure on growth.
Lee said that a thorough analysis of rising commodity prices and their impact on the local economy was crucial, along with a review of global economic conditions and uncertainties in financial markets.
The bank has set the benchmark interest rate at 1.25 percent in February after having raised it three times by a 0.75 percentage point since August last year. The BOK predicted that the yearly inflation rate will increase by 3.1 percent this year.
