Prices start to stabilize as inflation-taming measures take effect

Consumer prices grew at the slowest pace in November, indicating that the government is successfully keeping a lid on control, a government report showed yesterday.

According to Statistics Korea, the consumer price index rose 1.6 percent in November from a year earlier, improving from a 2.1 percent on-year gain the previous month.

“I want to express my gratitude to the people, businesses and government bodies that cooperated fully to bring the inflation rate from 4 percent to 2 percent,” said Finance Minister Bahk Jae-wan at an anti-inflation meeting yesterday.

Yesterday’s session was the 50th of its kind since the meetings were launched in July last year.

The November figure marked the slowest growth since August, when consumer prices rose 1.2 percent on-year. It is also below the central bank’s target band of 2 to 4 percent, set for 2010 through 2012.

Core inflation, excluding volatile oil and food prices, inched up 1.3 percent on-year last month, declining from a 1.5 percent increase in October.

Inflation hovered around 4 percent throughout 2011 but has stabilized in the last year on the back of government’s efforts to control prices of food and other products that could have a direct impact on the livelihoods of ordinary people.

The report showed that prices of agricultural, livestock and fishery products rose 2.9 percent on-year in November, falling from a 4.3 percent increase the previous month.

Prices of manufactured goods grew 1.5 percent on-year, while electricity, tap water and heating gas prices jumped 3.7 percent, suggesting that high utility bills remain a drag on inflation.

“Improved climate conditions and lower international oil prices led to decreases in farming and oil-related product costs, while personal and public fees seem to be stabilizing,” said a statement released by the Ministry of Strategy and Finance.

But the ministry cautioned there could be increasing supply-side risks triggered by a winter cold spell. “Possible fluctuations in crude oil prices could drive up inflation in the coming months,” it said.

To help stabilize gas prices during the winter, the Ministry of Knowledge Economy decided at the meeting to push for directly importing gasoline and diesel from foreign refiners and trading companies.

The finance ministry proposed cutting the interest rate on mortgages from 4 percent by half a percentage point to help boost the stagnant housing market.

By Song Su-hyun [ssh@joongang.co.kr]