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S. Korea faces no deflation pressure: BOK

All News 12:00 April 29, 2016

SEOUL, April 29 (Yonhap) -- South Korea currently faces no deflation risks and its consumer prices are projected to move upward to reach the target in the second half of the year, a central bank report said Friday.

The consumer price index has remained below the 1 percent level throughout last year, sparking concerns that deflation is already under way in Asia's fourth-largest economy.

In 2016, the index showed tepid signs of rebound although it hit 1.1 percent in February and 1 percent in March, following a 0.8 percent gain in January.

Citing the index of deflationary vulnerability by the International Monetary Fund (IMF), the Bank of Korea (BOK) said in its latest report that South Korea has "minimal" risks for deflation.

The IMF index divides the risk of deflation into four categories -- minimal, low, moderate and high. An index value below 0.2 is considered minimal, while a value above 0.5 indicates high risk for deflation.

South Korea's deflation vulnerability index hit 0.09 point in the third and fourth quarter each last year, down from 0.18 point in the second quarter.

The central bank said that the core inflation, which excludes volatile oil and food prices, has hovered around 2 percent for the recent months, staying at the target inflation rate of 2 percent.

The BOK said the consumer prices will likely get into an upward cycle in the latter half of the year to reach the 2 percent target by the end of the year.

Market watchers expected downward pressure on consumer prices to ease in the coming months on a recent upturn in crude oil prices, as global oil prices bottomed out to a 12-year low of US$26 in February to reach $47 in April.


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