Choi Says Korea
South Korea's Vice Finance Minister Choi Joong Kyung said accelerating inflation is mainly due to rising oil and grain prices, adding pressure on the central bank to lower interest rates to support economic growth.
“The government's task is to prevent the economy from going down further and to also control prices at the same time,'' Choi said on PBC radio in Seoul today. “It's difficult to control rising oil and grain prices.''
South Korea's government is trying to stimulate growth in an economy that it said last month has “entered a downturn.'' The Bank of Korea kept interest rates unchanged at the highest in almost seven years on May 8, saying rising commodity prices and a declining currency are stoking inflation.
“The government seems persistent in urging the central bank to cut interest rates,'' said Go You Sun, an economist at Daewoo Securities Co. in Seoul. “Still, rising prices and a decline in the won are likely to make the central bank cautious before going ahead with reductions.''
The central bank aims to keep inflation between 2.5 percent and 3.5 percent on average for the three years to 2009. Choi said authorities should focus on the three-year target rather than price movements in the short term cash advance loan no fax.
Adding to inflation concerns, the Korean won has dropped 10 percent against the dollar this year, the most among the world's 16 most active currencies. The won touched the lowest since November 2005 last week, and traded at 1,039.90 per dollar at 9:44 a.m. in Seoul.
One-Sided Moves
“In the past, the gains in the won helped absorb gains in prices,'' Choi said. “Exchange rates affect prices and also the current account. The government hopes exchange-rate moves won't be one-sided and hopes the movements won't be volatile.''
A weaker won has made imported goods more expensive, exacerbating the increases in commodity prices. South Korea is the world's fifth-largest importer of crude oil.
Finance Minister Kang Man Soo said in an interview on May 5 that inflation is “inevitable'' as food and fuel prices climb. He said last month it'll be “difficult'' to meet the government's 2008 economic-growth target of 6 percent.
The central bank's policy board next meets on June 12.
Filed under: economics by Forest