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S. Korea's inflation under downward pressure on temporary, structural factors

Xinhua, July 30, 2015 Adjust font size:

South Korea's headline inflation has been, and is to be, under downward pressures due to temporary and structural factors, a central bank report showed Thursday.

Bank of Korea (BOK) said in its semi-annual report that the low inflation, shown recently, was caused by structural factors, including population aging, low birthrate and globalization, along with temporary factors on the supply side such as cheaper oil.

The fast aging of population weakened consumer demand, " structurally" putting downward pressures on inflation. The globalization pulled down prices of goods imported from countries having lower labor costs.

The country's headline inflation moved around 3 percent in 2000s, but the rate declined to about 2 percent from 2011 to 2012, according to the BOK estimates.

Consumer prices rose 0.5 percent in the first half of this year on a yearly basis, after advancing 1.2 percent in the second half of last year. The consumer price inflation stayed below the inflation target's low end of 2.5 percent for 32 months in a row.

In addition to low commodity prices, lower fares for electricity, tap water and natural gas dragged down the first-half consumer price inflation. The BOK expected the inflation to increase to 1.2 percent in the second half of this year. Endi