Bank of Korea Expects Inflation Rate to Exceed 2.1% This Year

October 25 'Review of Recent Major Issues in Our Economy'
Director Kim "Cannot Rule Out Possibility of Inflation Exceeding 3% in October"
Risks Including Rising Raw Material Prices and Delays in Resolving Global Supply Bottlenecks

[Asia Economy Reporter Jang Sehee] The Bank of Korea forecasted that the annual consumer price inflation rate will exceed 2.1% this year.

On the 25th, at a press corps workshop held under the theme "Review of Recent Major Issues in Our Economy," the Bank of Korea stated, "If the international oil price, which recently rose to the $80 range, maintains its current level or rises further, the consumer price inflation rate this year is expected to exceed the August forecast of 2.1%."

The seminar was conducted via online live streaming on YouTube due to the spread of COVID-19.

Kim Woong, Director of the Bank of Korea's Research Department, who presented at the seminar, said, "Especially in October, the base effect from last year's mobile communication fee support may push the inflation rate above 3%. However, it is expected that the inflation rate will not approach 3% in November and December as the base effect disappears."

The consumer price inflation rate is expected to fluctuate at a level significantly above 2% for the time being. However, it was analyzed that the upside risks to the inflation outlook have increased due to the continued rise in crude oil and other raw material prices and delays in resolving global supply bottlenecks.

Director Kim stated, "If the global supply bottleneck phenomenon, which is a major factor driving inflation in the US and Europe, prolongs, it could also affect domestic inflation."

In particular, as the upward trend in oil prices continues, the inflation rate could increase further. According to the Bank of Korea, a 10% rise in oil prices raises consumer prices by about 0.1 to 0.2 percentage points. West Texas Intermediate (WTI) crude oil surpassed $80 intraday on the 5th, reaching its highest level since 2014, and is currently strong at the $84 range.

Meanwhile, it was analyzed that if owner-occupied housing costs are reflected in consumer prices, the current inflation rate would appear even higher. Director Kim said, "In Korea, the weight of monthly rent in the overall consumer price index is 9.4%, whereas in the US it is 31.2%. Including owner-occupied housing costs in the consumer price index would result in a higher current inflation rate."

This content was produced with the assistance of AI translation services.