(Menafn - ecPulse)
Producer prices in South Korea surged in January at the fastest pace in 10 months to signal accelerating inflation. Today's report is adding to pressures on monetary policy makers to raise interest rates from its low records especially after the economy grew in the fourth quarter of last year.
The producer price index rose 2.8% in January from a year earlier following an incline by 1.8%. On monthly basis, producer prices inclined 0.7%.
Today's report showed industrial goods prices jumped 3.4% from a year earlier, while gas, electricity and water prices climbed 6%. On the other hand, services costs inclined 2%, and the cost of agricultural, forestry and fisheries products fell 4.4%.
However, increasing prices may force the Bank of Korea to raise interest rates from its low records, especially with the nation's GDP continue to grow, while exports and manufacturing output are increasing. The Korean economy grew 0.2% in the quarter ended December 31, after growing 3.2% in the previous three months, and it expanded an annual 6.0% from 0.9%, keeping in mind that the full year growth came at 0.2%.
The Korean economy was one of few major economies skirted technical recession and it continued to advance last year backed by the government's stimulus spending and low interest rates that helped the nation's exports to be more competitive. Policy makers kept borrowing costs at 2.00% in January for the 11th straight month to support economic recovery.
On the other hand, the Korean government increased this year's budget by 3% to 292.8 trillion won ($256 billion) to support the economy, while the government pledged to accelerate distributing funds, which could be added as a sign of optimism in the upcoming period.
Yet, the central bank raised its inflation target range for the next three years, as the goal for 2010 to 2012 will be 3% plus or minus 1%, and the current target is 3% plus or minus 0.5%. We may see policy makers raising interest rates in the first quarter of this year to control inflation.