Rising PPI stokes fears of inflation

Korea’s producer price growth accelerated in February from the previous month because of a rise in oil prices and public service charges, the central bank said yesterday.

The producer price index (PPI), a barometer of future consumer inflation, gained 3.5 percent in February from a year ago, accelerating from a 3.4 percent on-year growth in the previous month, according to the Bank of Korea. The January figure marked the slowest pace of growth in 17 months.

The on-year gain was largely attributed to an increase in oil prices and utility fees. Prices for petroleum products soared 15.2 percent, while those for chemical products gained 4 percent. Utility fees, including transportation costs, jumped 10.3 percent.

Compared with the previous month, producer prices gained 0.7 percent in February, due mainly to a rise in fruit and vegetable prices. The growth pace stayed unchanged from January. The data comes a day after the central bank left the key interest rate unchanged for the ninth straight month in March.

On Thursday, BOK Governor Kim Choong-soo and his five fellow policy makers froze the benchmark seven-day repo rate at 3.25 percent as rising oil prices threaten to build up inflationary pressure amid fragile signs of economic recovery.

Even as Korea’s inflation rate eased to a 14-month low last month, the BOK committee remained wary of price gains because inflation expectations stayed persistently high and global oil prices may further rise from the current level of around $120 per barrel. The policy committee added a phrase in this month’s statement that it will be “endeavoring to lower inflation expectations.” Yonhap