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(LEAD) Inflation expected to peak in late Q3 or early Q4: finance minister

Finance 17:15 July 25, 2022

(ATTN: UPDATES with more details in last 5 paras)

SEOUL, July 25 (Yonhap) -- South Korea's consumer inflation is likely to peak late in the third quarter or early in the fourth quarter if there is no sharp hike in global oil and grain prices, Finance Minister Choo Kyung-ho said Monday.

Consumer prices may markedly stabilize starting in October if the harvest of farm products is not seriously hampered by typhoons after the Chuseok fall harvest holiday, set for Sept. 9-12, according to the minister.

"If oil prices show similar movements to current trends, consumer prices may peak no later than in October. ...Inflation is likely to reach its pinnacle late in the third quarter or early in the fourth quarter," Choo told reporters.

Consumer prices soared 6 percent in June from a year earlier, the fastest clip in nearly 24 years and acceleration from a 5.4 percent on-year spike in May.

The country's inflation is under upward pressure due mainly to soaring oil and commodity prices caused by the protracted war between Russia and Ukraine. A rebound in demand from the pandemic also pushed up inflation.

The government plans to roll out an additional measure to stabilize people's lives and curb inflation next month ahead of the Chuseok holiday.

Demand for vegetables, eggs and other foodstuff usually rises in South Korea ahead of the Lunar New Year holiday and the Chuseok fall harvest holiday as people prepare holiday meals for family gatherings.

In this file photo, people shop for groceries at a discount chain store in Seoul on July 4, 2022, amid high inflation. (Yonhap)

Meanwhile, Choo dismissed concerns that there could be massive outflows of foreign capital if the Federal Reserve's aggressive monetary tightening causes U.S. interest rates to stay higher than South Korean rates.

Investors expected the Fed to hike interest rates by another 75 basis points at this week's policy meeting to tame inflation. The potential hike will raise the U.S. federal funds rate to a target range of 2.25-2.5 percent, higher than the Bank of Korea's base rate of 2.25 percent.

"There is little possibility of foreign capital flight in light of South Korea's external credit positions," Choo said.

"But as market volatility is growing, the government is checking the market and drawing up necessary measures to tackle emergency situations," he added.

Choo will host a meeting with the chiefs of the central bank and the financial regulators Friday to discuss the impact of the Fed's rate decision on the financial market.

sooyeon@yna.co.kr
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