Inflation stuck in 1 percent range for eighth month

Worries about possible deflation are growing as the nation’s inflation rate stayed in the 1 percent range for the eighth consecutive month.

According to Statistics Korea yesterday, consumer prices grew 1 percent in June compared to a year earlier, a retreat of 0.1 percent month-on-month.

It was the lowest growth since September 1999, when inflation was 0.8 percent after the Asian financial crisis.

The low rate was largely due to declining oil prices, according to the Ministry of Strategy and Finance. As countries cut back on oil consumption, fell 5.1 percent last month compared to a year earlier.

Decreases in agricultural prices also helped stabilize the overall consumer prices, the ministry said.

Prices of agricultural products fell 2.2 percent month-on-month in June, while those of cattle products dropped 5.1 percent, owing to better weather conditions last year.

Meanwhile, prices of services rose 1.3 percent during the same period, exceeding the overall growth rate. The rise was mainly led by hikes in taxi fares (7.7 percent) and tap water prices (6.2 percent).

The Bank of Korea has said an appropriate range of inflation for the economy would be between 2.5 percent and 3.5 percent. Experts say hovering lower than the range set by the central bank could suggest the possibility of deflation like that which occurred in Japan.

However, the Finance Ministry maintains that the numbers indicate consumer prices have become stabilized due to supply-side factors like the weather conditions and falling oil prices.

“There is no need to worry about deflation yet, since prices are forecast to pick up in the second half of the year due to some base effect seasonal factors,” said Lee Dae-hee, a director of price policy at the Finance Ministry.

BY SONG SU-HYUN [ssh@joongang.co.kr]