Calm the inflationary pressurePrices are skyrocketing. The inflation rate in October is expected to rise into the three percent range for the first time in ten years. To make matters worse, the Korean won-to-dollar exchange rate increased rapidly, boosting prices of imports along with the prices of apartments and jeonse (long-term deposit leases).
Above all, the steep hikes in oil prices are alarming. Gasoline prices in Seoul exceeded 1,800 won ($1.5) per liter. The rise of diesel fuel deals a critical blow to many self-employed such as truck drivers. The prospects are even gloomier given the increasing demand for petroleum amid a global energy crisis and the expected reduction of oil production in the United States. As a result, international oil prices will likely remain higher than before for a while.
Soaring energy prices directly impact the prices of other commodities. Ordinary people are frustrated by rising prices of staple foods and daily necessities. The price of a carton of 15 eggs, for instance, rose to 9,000 won in neighborhood markets. According to a consumer market watcher, prices of 76 necessities rose by 4.4 percent on average in the third quarter compared to the year-ago period. Prices of eggs in particular soared by a whopping 70 percent and tofu prices by 16.5 percent compared to last year.
In the meantime, people’s livelihoods are getting tougher. The sharp rises in the prices of apartments and jeonse contracts exacerbate people’s woes. The government’s abrupt tightening of mortgages to help curb soaring home prices only deepened the pain. The financial authorities later eased loan regulations, but interest rates nevertheless continue escalating. The interest rate for mortgages is approaching five percent.
Under such circumstances, the most vulnerable to inflation shock are mom-and-pop store owners since they cannot raise prices of their foods for fear of a backlash from customers.
After brushing off inflationary pressure, the Moon Jae-in administration is finally responding. Deputy Prime Minister for Economic Affairs Hong Nam-ki mentioned a plan to keep rising oil prices at bay by lowering energy taxes. The Ministry of Trade, Industry and Energy reportedly asked the Ministry of Strategy and Finance to consider a lowering of tariffs on as many as 90 items, including LNG and eggs, for an unspecified period of time.
Steep inflation on top of the government’s repeated failures in real estate policy are pushing the people over the edge. We must mitigate inflationary pressure by whatever means available. We hope the government demonstrates its competence in tough times like this.