The Bank of Korea’s top policy priority this year will be to stabilise inflation, while adjusting monetary policy in view of the global economic situation, the central bank said Thursday.
Separately, the Finance Ministry pledged to make an effort “on all fronts” to curb price pressures, at a time when surging oil and commodities prices are fanning inflation expectations around the region.
The government is to announce price-stabilization measures on Jan. 13 amid growing concerns over price increases ahead of the Lunar New Year holiday in early February.
“(The Bank of Korea) will make efforts to avoid the consumer inflation rate diverting significantly from the mid-point of the inflation target,” the central bank said in a statement in its annual monetary and credit policy report,
“We will also take notice of the possibility that financial and economic imbalances could occur due to an extended period of loose monetary policy and will take a close monitoring of market liquidity and the asset market situation.”
The Bank of Korea, which keeps its inflation target at between 2 and 4 percent for the 2010-2012 period, raised interest rates twice last year and is widely seen as poised to lift them further from as early as February.
But the bank did not give any more specific comments on the immediate policy direction.
Consumer inflation is forecast to quicken to 3.5 percent this year from last year’s 2.9 percent, according to the Bank of Korea.
The Finance Ministry said the government will take “comprehensive” measures to stabilize prices in a bid to prevent inflationary pressure from hurting the livelihood of ordinary people and dampening the overall economic recovery.
The government will also manage its macroeconomic policy in a “stable” manner to achieve a sustainable recovery by taking into account all risk factors at home and abroad, the ministry said in its monthly report on the latest economic conditions.
“Despite continuing recovery in the global economy, high uncertainties remain, such as risks from North Korea and debt problems in Europe. Fluctuations in raw material prices and ample global liquidity are also raising concern over inflation centering around emerging countries,” the report said.
“For our economy to achieve a robust recovery, we should step up our monitoring of risk factors, improve economic fundamentals and run macroeconomic policy in a stable manner,” it added.
The relatively grim economic assessment comes as the government is intensifying efforts to stabilize prices amid concerns that inflation could put a brake on the nation’s faster-than-expected economic recovery.
On Wednesday, key economic policymakers convened a closed-door meeting to discuss measures aimed at stabilizing prices of key items and services that could impact the daily lives of low-income and other ordinary people.
Freezes on college tuition and other public service fees are among measures being discussed as part of the government drive to stabilize prices. In a related move, the government reportedly plans to meet presidents of major local colleges later this week to call for their cooperation in freezing tuition prices for this year.