South Korea’s consumer prices rose 2.6 percent in March from a year earlier, the slowest pace in 20 months, before a central bank meeting next week to set benchmark interest rates.
The median estimate in a Bloomberg News survey of 11 analysts was for a 3.2 percent increase. Prices fell 0.1 percent from February, Statistics Korea said today.
The Bank of Korea aims to keep inflation at the midpoint of a range of between 2 percent and 4 percent over the medium term. The central bank kept the benchmark seven-day repurchase rate unchanged at 3.25 percent for a ninth month in March as Europe’s debt crisis and austerity measures capped demand for exports.
“Inflation may creep up again due to high oil prices and elevated inflation expectations, with the economy likely to gain pace from the second quarter” said Kim Nam Hyun, a Seoul-based fixed income analyst at Eugene Investment (001200) & Futures.
Government subsidies for child care and an expanded free school lunch program cut consumer prices by 0.5 percentage points, Ahn Hyung Jun, a director at Statistics Korea, told reporters in Gwacheon today.
South Korea’s government won’t revise a 3.2 percent inflation forecast for this year because high oil and agricultural prices will likely offset the government subsidies for childcare expenses, Deputy Finance Minister Joo Hyung Hwan told reporters in Gwacheon.
Core prices, which exclude oil and agricultural products, advanced 1.9 percent in March from a year earlier, today’s report showed.
Exports were less than analysts forecast in March, sliding 1.4 percent from a year earlier, a separate report showed yesterday. The nation’s economy may have bottomed in the first three months of the year and will return to a recovery path this quarter, according to Finance Minister Bahk Jae Wan.
Gross domestic product grew 0.3 percent in the three months to December from the third quarter, the least in two years.
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