State benefits, falling oil prices slow inflation

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State benefits, falling oil prices slow inflation

Korea’s inflation moderated in June on falling oil prices and the government’s expansion of free school lunch and child care programs, giving the central bank more leeway to forgo raising borrowing costs.

Consumer prices increased 2.2 percent from a year earlier after a 2.5 percent gain in May, Statistics Korea said yesterday. The median estimate in a Bloomberg News survey of 12 economists was for a 2.5 percent gain. Prices fell 0.1 percent from May.

The Ministry of Strategy and Finance on June 28 lowered its forecasts for inflation and economic growth for this year, citing the European debt crisis as a “long-term threat.” The Bank of Korea, which targets inflation at between 2 percent and 4 percent, will determine borrowing costs on July 12.

“Inflation is going to decelerate for months to come,” said Lim Ji-won, an economist at JPMorgan Chase in Seoul. “Prices of manufactured goods have been falling with oil prices so this is being reflected in June.”

Core consumer prices, which exclude oil and agricultural products, advanced 1.5 percent in June from a year earlier.Bloomberg

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