December 29, 2017 / 1:27 AM / a year ago

South Korea December inflation speeds up as global oil prices rise

SEOUL (Reuters) - South Korea’s annual inflation accelerated in December to its fastest in three months as rising global oil prices lifted the cost of petrochemical and other industrial products, but with few implications seen for monetary policy.

A woman walks in Myeongdong shopping district in Seoul, South Korea, May 30, 2017. Picture taken on May 30, 2017. REUTERS/Kim Hong-Ji

Statistics Korea said the consumer price index rose 1.5 percent in December from a year ago, in line with the expectations seen in a Reuters survey.

Park Seok-gil, an economist at JP Morgan Chase & Co., said the current inflation level was unlikely to prompt any changes in monetary policy soon.

“Inflation at 1.3 percent in November was probably a downside surprise, and consumer prices will continue to gain towards the Bank of Korea’s 2 percent target,” Park said.

A Statistics Korea official said consumer prices were largely stable in December, with the 1.8 percent on-year gain in service prices unchanged from November.

Inflation stayed below the BOK’s target level for most of this year, but the central bank sees inflation approaching the target as oil prices rise and the global economy recovers.

The month-on-month gain was 0.3 percent, slightly above the poll’s forecast of a 0.2 percent rise.

Petroleum prices jumped 7.5 percent in December from a year earlier, Statistics Korea said, raising prices for petrochemical and other industrial goods for local consumers.

Global oil prices remained near 2-1/2-year high this week on strong demand for oil in China and increased U.S. refining activity that drew more crude from inventories.

The BOK raised interest rates last month for the first time in more than six years to 1.50 percent, yet tempered market expectations for further hikes by raising concerns about the job market and other uncertainties.

Core CPI, which excludes oil and agricultural products, rose 1.5 percent from a year ago, accelerating from 1.2 percent in November and marking the fastest gain since September when it rose 1.6 percent.

Inflation for the whole of 2017 was 1.9 percent.

Reporting by Cynthia Kim and Dahee Kim; Editing by Eric Meijer

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