(2nd LD) S. Korea’s inflation speeds up in Aug., rate policy in focus

South Korea's consumer prices increased at a faster-than-expected pace in August due to higher prices of agricultural and manufactured goods, data showed Tuesday.

Consumer prices, a key gauge of inflation, rose 3.4 percent last month from a year earlier, accelerating from the 2.3 percent increase in July, according to the data from Statistics Korea.

It was the highest on-year rise since the 3.7 percent growth tallied in April.

Core inflation, which excludes volatile food and energy prices, rose 3.3 percent on-year in August, expanding at the same margin as July.

"The fact that core inflation remained at the same level as the previous month indicates that consumer prices in August were affected by temporal factors, rather than representing a shift in the overall trend," an official from the agency said.

The prices of utility services continued to grow sharply, advancing 21.1 percent over the period, as the country raised electricity bills to make up for its snowballing losses. South Korea depends heavily on imports for its energy needs.

Those of agricultural and fishery products moved up 2.7 percent following heavy rains, with the price tag of rice, a key staple food for Koreans, advancing 7.8 percent over the period.

Prices of industrial products gained 2.6 percent on-year in August, led by clothes.

Costs of diesel and gasoline, however, moved down 16.9 percent and 4.6 percent, respectively.

The service sector gained 3.1 percent on-year in August due to higher insurance and house management costs.

The finance ministry stated that inflation is anticipated to stabilize after October.

The ministry said it will closely monitor prices of key products ahead of the Chuseok holiday, the autumn harvest celebration, which falls in late September.

"The moderating inflation has been continuing, but the reflection of the sharp hike in global oil prices, which began in mid-July, is delayed in the current numbers," First Vice Finance Minister Kim Byoung-hwan said during a meeting.

Last month, South Korea's central bank held its key interest rate steady at 3.5 percent for the fifth straight time as it weighs a slowdown in growth amid moderating inflation.

But Bank of Korea Gov. Rhee Chang-yon said the bank's tightening mode will continue given higher inflation, saying the door is still open for an additional rate hike.

Source: Yonhap News Agency

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