South Korea's annual producer inflation steady

South Korean annual producer price inflation held steady in June after easing for two consecutive months although it remained relatively high, data showed on Friday, a week before the central bank's monthly policy meeting. The producer price index (PPI) rose 6.2 percent in June from a year earlier, the same as in May when the pace of growth slowed from 6.8 percent in April and 7.3 percent in March, the data from the Bank of Korea showed.
It was still high compared to an average rise of 3.8 percent for the whole of 2010 and a decline of 0.2 percent in 2009. Analysts said easing producer inflation boded well for consumer inflation in the months ahead, but the central bank would probably raise interest rates further this year because price pressures would not abate quickly. "(Inflation) will come down only gradually and will remain vulnerable to global commodities prices. Moreover, price pressures related to domestic demand are very high," said Park Sang-hyun, chief economist at HI Investment & Securities. From a month earlier, the producer price index fell 0.3 percent in June after a 0.1 percent fall in May, when the index ended 10 consecutive gaining months.
The data was released before financial markets opened. The Bank of Korea's monetary policy committee surprised markets last month by lifting the policy interest rate for the third time this year and warned of inflation pressure remaining high. It next meets to review policy on July 14. The central bank has a target of keeping the annual rate of consumer inflation below 4 percent on average for the 2010-2012 period, but the consumer price index has exceeded that target for the past six consecutive months.