Inflation expectations up again in February ahead of bank's policy meeting

A customer selects a tofu product from the low-priced food section at a 7-eleven convenience store in Seoul amid rising consumer prices and higher interest rates on Feb. 5. [YONHAP]

Korea's inflation expectations rose for the second straight month in February on worries over rising public utility charges ahead of the Bank of Korea's (BOK) monetary policy meeting set for later this week, a central bank survey showed Tuesday.

People predicted consumer prices will grow 4 percent over the next year, up 0.1 percentage points from what was surveyed the previous month, according to the poll conducted by the BOK early this month.

It was the second straight month of a rise.

Of those surveyed, 87.7 percent cited utility bills as a major reason to drive up inflation pressure, followed by oil-related and farming products with 29.2 percent and 27.6 percent, respectively, the poll showed.

The figures are closely watched, as their upward move could cause businesses to raise prices and people to ask for pay raises, thereby resulting in more upward pressure on inflation going forward.

The BOK is set to hold a rate-setting meeting Thursday after it delivered yet another quarter percentage point rate increase last month to tackle persistently high inflation. January's increase marked the seventh straight rate hike since April last year.

Market watchers are divided over the BOK's rate move.

Some say it could stand pat this week amid worries that aggressive monetary tightening could hurt the economy, while others predict a quarter point rate increase citing still high inflation pressure.

In January, the country's consumer prices rose 5.2 percent on year, accelerating from the previous month's 5 percent increase.

Yonhap