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S Korea's central bank to place top priority on price stability in 2012

12-29-2011 14:53 BJT

SEOUL, Dec. 29 (Xinhua) -- The Bank of Korea (BOK), South Korea' s central bank, said Thursday that it will place its top priority for next year's monetary policy on price stability in a bid to ease the heightened inflation expectations.

"In conducting monetary policy, the BOK will place emphasis on firmly anchoring the basis for price stability, while taking into consideration financial and economic conditions and risk factors at home and abroad," the central bank said in a report for the 2012 monetary policy direction.

The BOK vowed to stabilize consumer price inflation at the midpoint of the inflation target band 2-4 percent over a medium term horizon, saying that it will closely scrutinize the movements of core prices and inflation expectations to ensure that prolonged inflationary pressures do not become entrenched.

The nation's consumer price inflation was expected to reach 4 percent in 2011, up from 3 percent tallied in the previous year. It matched the upper ceiling of the inflation target band 2-4 percent.

Inflation expectations among the nation's general public jumped to 4.1 percent in the fourth quarter of this year from 3.3 percent a year earlier as prices for daily necessities rose at a faster pace during the period, according to the BOK.

"Supply-side factors contributed to this year's consumer price inflation by 90 percent, while demand-side ones accounted for 10 percent of the inflation," Lee Sang-woo, director general of the BOK's research department, told reporters.

Lee noted that inflation expectations rose to the higher level this year despite the BOK's rate hikes, stressing that the expected inflation does not tend to go down with ease after going up to the high level. The central bank kept its benchmark interest rate for the sixth straight month in December after raising its borrowing costs in five steps to 3.25 percent from a record-low of 2 percent.

Editor:Zhang Hao |Source: Xinhua

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