Bloomberg News

South Korea Producer Prices Rise at Slowest Pace in Four Months

June 09, 2011

June 10 (Bloomberg) -- South Korea’s producer prices rose at the slowest pace in four months, bolstering the case for the nation’s central bank to keep borrowing costs on hold for a third straight month today.

Prices increased 6.2 percent in May from a year earlier, after peaking at a 28-month high of 7.3 percent in March, the Bank of Korea said in a statement in Seoul today. They fell 0.1 percent from April, the first decline since June 2010.

Consumer-price gains, which held above the central bank’s 4 percent target ceiling, also moderated last month. The central bank will probably hold its benchmark seven-day repurchase rate at 3 percent today, according to nine of 17 economists surveyed by Bloomberg News. The rate decision will be announced at around 9:30 a.m.

Consumer prices rose 4.1 percent in May from a year earlier, the fifth-straight month it exceeded the central bank’s target of 2 percent to 4 percent through 2012. Core inflation excluding volatile food and energy items accelerated to a two-year high of 3.5 percent in May.

The central bank has raised interest rate from a record-low 2 percent since early July as it expects consumer prices to rise 3.9 percent this year, while the economy will grow 4.5 percent.

Governor Kim Choong Soo and his board unexpectedly left borrowing costs unchanged last month after two quarter-point increases in January and March. Kim said on May 18 that the Bank of Korea will continue to boost borrowing costs at its own pace and that the nation needs to be vigilant about inflation.

--Editors: Lily Nonomiya, Ken McCallum

To contact the reporter on this story: Eunkyung Seo in Seoul at eseo3@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net


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