Roundup: S. Korea's headline inflation stays below 2 percent for 5 months

SEOUL, March 6 (Xinhua) -- South Korea's headline inflation stayed below 2 percent, the Bank of Korea (BOK)'s mid-term inflation target rate, for five straight months, allowing a room for the delayed interest rate hike, a government report showed Tuesday.

Consumer prices gained 1.4 percent in February from a year earlier, hovering below the 2 percent level for the fifth consecutive month, according to Statistics Korea. The 2 percent is the BOK's inflation target rate set for the three-year period through 2018.

The BOK raised its benchmark interest rate by a quarter percentage point in November last year to 1.5 percent, but it was identical to the upper end of the U.S. Federal Reserve's benchmark rate range of 1.25-1.50 percent.

Pressures mounted on the BOK to raise its policy rate further as the Fed was widely forecast to lift the benchmark rate range as early as in March.

The relatively stable inflation, however, reduced pressure on the BOK despite the remaining worry about a foreign capital exodus from the South Korean financial market, caused by the Fed's rate increase at a faster pace than the BOK would do.

The headline inflation was bolstered by expensive farm goods, the price of which turned around in four months on the winter cold wave.

Prices for agricultural, livestock and fishery products advanced 3.5 percent in February from a year earlier, marking the highest increase since September last year.

Agricultural product price jumped 7.4 percent in the month, raising the overall inflation by 0.34 percentage points.

Prices for electricity, tap water and natural gas declined 1.5 percent, pulling down the inflation by 0.06 percentage points.

Services prices, however, gained 1.7 percent in February on a yearly basis, pulling up the consumer price inflation by 0.95 percentage points.

Private services price increased 2.4 percent in February amid the fast rise in eating-out costs. It was higher than a 2-percent gain in January, pulling up the overall inflation by 0.78 percentage points.

Despite the government's minimum wage hike from the first month of this year, its effect has not been yet as big as some of experts had expected.

The higher dining-out costs were attributed to seasonal factors such as the fast increase in farm goods prices.

The so-called livelihood product prices, which reflect daily necessities, climbed 1.4 percent in February, after gaining 0.8 percent in the previous month.

Fresh food prices, which measure the costs for fruits and vegetables, added 4.3 percent in February, the first rebound in four months.

Core prices, which exclude volatile agricultural and oil products, rose 1.2 percent in February, slightly up from a 1.1-percent increase in January. Enditem