South Korea’s headline inflation averaged 2.5% in 2021 after remaining above the central bank’s annual 2.0% target for a ninth consecutive month in December.

The highest annual inflation since 2011 in Asia’s fourth largest economy justifies the Bank of Korea’s ongoing tightening of its easy-money policy that had been induced by the pandemic.

The benchmark consumer-price index rose 3.7% from a year earlier in December, compared with the prior month’s decade high of a revised 3.8%, the statistical office said Friday. The latest reading matched the median forecast of five economists polled by The Wall Street Journal.

Higher prices of agricultural and industrial products as well as utilities services continued to add to inflationary pressure even though a temporary fuel-tax cut helped ease price growth on month in the country.

Compared with the prior month, the index rose 0.2% in December, a softer pace than the previous month’s 0.4% increase. The latest reading was in line with the median forecast.

Core CPI, which strips out volatile energy and food prices, rose 2.2% from a year earlier, compared with November’s 1.9% gain. It rose 0.4% from a month ago, a faster pace than 0.1% in November.

The Bank of Korea has signaled it would tighten policy further to curb inflation since it raised interest rates in November for the second time in 2021.

The bank expects inflation to average 2.0% in 2022, up from its earlier projection of 1.5%.

First Vice Finance Minister Lee Eog-won said Friday he expects inflationary pressure to remain high in the first half of 2022 before tapering off gradually.

Source: This post first appeared on http://marketwatch.com/

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