The statistical office said inflationary pressure increased due to rising public utility charges which surged 28.3 percent year-on-year last month, marking the biggest increase since 2010. The upsurge was driven by a hike in the rates of electricity and gas three times last year -- in April, July and October. The rates were also raised last month.
The authorities have continued to ramp up the public utility charges as global energy prices shot up since Russia started war with Ukraine in February 2022. The rates are expected to rise further down the road to make up for snowballing losses of state-run Korea Electric Power Corp. (KEPCO) and other utility firms.
Electricity charges soared 29.5 percent year-on-year last month. They climbed 9.2 percent from December. City gas rates shot up 36.2 percent year-on-year, while heating bills jumped 34 percent. Public utility charges had the effect of raising consumer prices by 0.49 percentage point in July, 0.77 percentage point in October, and 0.94 percentage point last month.
The overall inflation rate hit its peak of 6.3 percent in July 2022 after recording 5.4 percent in May and 6 percent in June. The rate stood at 5.6 percent in September and 5.6 percent in October before edging down to 5 percent in both November and December.
Consumer prices rose 0.8 percent in January from December, reaching the steepest growth since September 2018.
Prices of manufacturing goods climbed 6 percent year-on-year last month. Diesel and kerosene prices surged 15.6 percent and 37.7 percent, respectively. However, the gasoline price fell 4.3 percent.
Prices of processed food increased 10.3 percent, the highest since April 2009. Bread, snack and coffee prices jumped 14.9 percent, 14 percent and 17.5 percent, respectively. Prices of farm, dairy and fisheries products edged up 1.1 percent amid the cold spell. Prices of dining out increased 7.7 percent, down from 8 percent.
Market watchers said taming inflation is one of the greatest challenges the South Korean economy faces, adding that regaining price stability is key to a sustainable economic growth.
The Bank of Korea (BOK) is under greater pressure to raise its key interest rate to bring inflation under control, after increasing the rate by 0.25 percentage point to 3.5 percent last month.
An economist said that a further rate hike is required, especially after the U.S. Federal Reserve increased its benchmark rate by 0.25 percentage point to a range of 4.5 percent to 4.75 percent on February 1, the highest level since late 2007.
Following the quarter-point hike, the interest gap between the United State and South Korea widened to 1 percent to 1.25 percent, the widest since October 2000.
Prime Minister Han Duck-soo said the government will take measures to ensure price stability to improve people's livelihoods and revive momentum for sustainable economic growth. He promised that the government will closely monitor internal and external factors to step up the fight against inflation.
BOK Deputy Governor Lee Hwan-seok said that consumer prices are predicted to continue to grow by around 5 percent for the time being, adding that the central bank is keeping close tabs on inflationary factors such as the reopening of China's economy which could put upward pressure on the prices of energy and raw materials.
However, the central bank and the Ministry of Economy and Finance forecast that inflationary pressure will be eased in the second half of the year after remaining at the current level in the first half.
In December, the ministry predicted that consumer prices will be stabilized lower at 3.5 percent this year, while the economy will grow 1.6 percent.
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