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Talks of rate hike too early amid accelerating inflation: senior official

Finance 11:29 May 13, 2021

SEOUL, May 13 (Yonhap) -- South Korea's consumer prices have recently accelerated, but it is too early to say that the country's economy is overheated enough to warrant a rate hike, a senior government official said Thursday.

First Vice Finance Minister Lee Eog-weon said inflation growth picked up in March and April due largely to a low base effect from last year when inflationary pressure remained muted amid the pandemic.

Lee told a radio program that it seems be too early to judge that the country needs a key rate hike or that Asia's fourth-largest economy is overheating.

Global inflation fears mounted as U.S. consumer prices shot up 4.2 percent on-year in April, the fastest in nearly 12 years.

South Korea's consumer prices grew 2.3 percent in April from the previous year, the fastest on-year gain in almost four years, as prices of farm and oil products increased.

Policymakers said inflation will likely pick up in the second quarter due largely to the lower base effect and high prices of agricultural and petroleum products.

Last month, the Bank of Korea (BOK) froze its key interest rate at a record low of 0.5 percent amid concerns of another wave of infections. The BOK aims to keep inflation at 2 percent over the medium term.

This file photo, taken April 2, 2021, shows vegetables for sale at a traditional market in Seoul. (Yonhap)

sooyeon@yna.co.kr
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