South Korea's Prices Will Remain High, Kang Says

By Seyoon Kim

Aug. 22 (Bloomberg) -- South Korea's consumer prices are likely to remain high this month and in September even after oil's recent decline, Finance Minister Kang Man Soo said.

``Oil prices have stabilized somewhat, but the impact on domestic prices is likely to remain through this month and the next,'' Kang said at a weekly government meeting in Gwacheon today.

Consumer prices climbed 5.9 percent in July from a year earlier, the biggest gain since 1998, on costlier oil. Record fuel and food costs have been reducing purchasing power for consumers and hurting corporate profits. The price of Dubai crude, South Korea's benchmark, has fallen 17 percent since July.

The Bank of Korea on Aug. 7 raised interest rates to an eight-year high of 5.25 percent, joining central banks across the region in increasing borrowing costs to stem inflation.

Kang said the government plans to increase shipments of fish and other food ahead of the Chusok Thanksgiving holidays due in September, as rising demand may push up prices. South Koreans buy more food and gifts ahead of the holidays, which fall on Sept. 13- 15 this year.

The government will monitor 21 key food prices and service charges including rice, pork, chicken, eggs, apples, widely consumed ahead of the Chusok holidays.

Kang urged ministers to check price trends and join efforts to stabilize prices. Kang also asked each ministry to implement planned government spending on projects to help the economy.

To contact the reporter on this story: Seyoon Kim in Seoul at skim7@bloomberg.net