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BOK blames low oil prices for weak price increase

All News 14:19 July 14, 2016

SEOUL, July 14 (Yonhap) -- South Korea's central bank on Thursday named low global oil prices as a main cause of the country's slow consumer price increase in the first half, insisting its local demands have remained strong and will continue to expand.

In the first six months of the year, the country's consumer prices have gained only 0.9 percent from the same period last year, falling far short of the central bank's 2 percent target for the 2016-2018 period, the Bank of Korea (BOK) noted.

"This was partly because an upward pressure from the demand side remained weak due to a delay in economic recovery, but the main cause rather came from a large drop in global prices of raw materials, such as global oil prices," the BOK said in a press release.

"However, when considering that the core inflation, which excludes volatile oil and food prices, grew 1.7 percent in the January-June period, the downward pressure on consumer prices from the demand side does not appear to have been too great," it added.

The BOK said the average price of Dubai crude, South Korea's benchmark, was about 35 percent lower than average from the first half of 2015, claiming the country's consumer prices may have gained an additional 0.8 percentage point without such a reduction in oil prices.

"A drop in import prices in addition to a cut in global oil prices was also a factor limiting the rise in consumer prices. Due to a dip in global prices of raw materials and weak global demands, the country's import prices dwindled about 7 percent from a year earlier," it said.

The press release offered an explanation for a failure to meet the inflation target. BOK Gov. Lee Ju-yeol was also scheduled to hold a press briefing later in the day as the top central banker is required to do so when actual inflation strays from the target by more than 0.5 percentage point in either direction for more than six months.

The BOK forecast consumer prices will rise 1.3 percent in the second half.

For the entire year, the central bank revised down its outlook for consumer price inflation to 1.1 percent from 1.2 percent forecast three months earlier.

bdk@yna.co.kr
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