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September service inflation rises 4.2%

Posted October. 10, 2022 08:02,   

Updated October. 10, 2022 08:02


With the 5-percent inflation growth continuing for five consecutive months, seven out of the ten frequently consumed processed food by consumers are found to have their prices increased. The service inflation, including restaurants, has witnessed the highest jump in 21 years, soaring over 4 percent year-on-year. As the high inflation persists, together with the speed of the U.S. interest rate hike picking up, the Bank of Korea (BOK) is expected to take another round of “big step” (raising the base rate by 0.5 percentage points).

According to ‘True Price’ the comprehensive price information portal of the Korea Consumer Agency (KCA) on Sunday, among the 32 commonly consumed processed food, prices of 22 products increased by 68.8 percent against the previous month. Among these items, the price for red chili pepper paste soared by 11.7 percent, mainly because major manufacturers’ release prices rose for red chili pepper paste, and the distributors’ discount promotion events ended. Other items’ price hike was high in the following order: Coke (9.6%), tuna can (5.9%), mayonnaise (5.1%), ramen (instant noodle) (4.8%), soup (4.6%), fish cake and instant rice (3.1%).

The service inflation including restaurants jumped hugely. According to the ‘September Consumer Price Trend’ published by Korea Statistics Office, service inflation increased by 4.2 percent year-on-year. This is the biggest surge since the 4.3 percent growth in October 2001. The service inflation hike is continuing its 4 percent level increase for three months after the inflation exceeded 4 percent in July for the first time in 14 years.

With the inflation skyrocketing, the possibility of the central bank raising the base rate by 0.5 percentage points in the Monetary Policy Board scheduled for Wednesday is becoming even stronger. BOK Governor Rhee Chang-yong stated in the National Assembly, “the BOK expected the U.S. Fed’s final rate at the end of this year to be 4 percent, but the base rate has climbed over 4.4 percent, and next year’s final interest rate outlook has risen to 4.6 percent,” and explained that the pre-conditions of a domestic base rate hike of 0.25 percent had changed much.

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