Roundup: S.Korea's consumer price inflation stays below 2 pct for 8 months

SEOUL, June 1 (Xinhua) -- South Koreas consumer price inflation hovered below 2 percent for eight straight months on low prices for livestock and electricity, tap water and natural gas that offset higher prices for vegetable and oil products, a government report showed Friday.

Consumer prices gained 1.5 percent in May from a year earlier, according to Statistics Korea. The headline inflation stayed below 2 percent since October last year, after hovering above the level for the past three months.

Agricultural products jumped 9 percent in May from a year ago, pulling up the overall inflation by 0.38 percentage points.

Vegetable prices advanced 13.5 percent, marking the fastest increase since August last year. Rice prices surged 29.5 percent, logging a double-digit increase for the third consecutive month.

Potato prices soared 59.1 percent in May, after jumping 76.9 percent in the previous month. Prices for powered red pepper and white radish gained by a double digit.

Expensive vegetable increased the living costs for households. Prices for food and beverage gained 2.5 percent last month, pulling up the headline inflation by 0.35 percentage points.

Dine-out costs rose 2.7 percent in May, marking the identical growth rate with April.

The costly agricultural products were offset by cheaper livestock products. Prices for livestock product retreated 8.1 percent in May, after dipping 4.7 percent in the previous month.

Prices for electricity, tap water and natural gas declined 3.3 percent in May, marking the fastest fall since November last year.

Meanwhile, oil product prices picked up 6 percent in May from a year earlier, pulling up the overall headline inflation by 0.27 percentage points amid expensive global crude oil. It was the fastest growth in five months.

Gasoline prices went up 6.3 percent, the highest in 6 months. Diesel prices jumped 8.1 percent, marking the highest in 12 months.

Despite the higher prices for farm goods and oil products, the Bank of Korea (BOK) was unlikely to be pressured to raise its benchmark interest rate in the foreseeable future as inflationary pressure mainly came from the supply side.

Core consumer prices, which exclude volatile costs for agricultural and oil products, rose 1.3 percent in May from a year earlier. The core inflation reflects inflationary pressure from the demand side.

The BOK lifted its policy rate in November last year to 1.5 percent from an all-time low of 1.25 percent, posting the first rate increase in almost six and a half years.

Since then, the BOK has frozen the policy rate at the current level, which fell below the U.S. Federal Reserves target rate ranging from 1.50 percent to 1.75 percent.

The Fed was widely expected to raise its benchmark rate further in the near future. If the BOK belatedly raises the seven-day repurchase rate, foreign capital may abruptly flow out of the South Korean financial market to seek high-yield assets. Enditem