SEOUL -(Dow Jones)- The South Korean government unveiled a series of measures to fight rising inflationary pressures Thursday, saying its top priority for the first half of the year will be price stability, as recent sharp gains in global oil and raw material prices threaten to lift inflation above its forecast of around 3% for this year.
The measures include the monitoring of price moves in products used widely by the low- to middle-income classes, which critics have panned as a simple regurgitation of a plan announced months earlier.
The announcement came shortly after the Bank of Korea unexpectedly raised its benchmark interest rate by 25 basis points to 2.75%.
"We will put the first half's top policy priority on price stability and do everything we can do to fight inflation. Macroeconomic policies will be aimed at strengthening price stability and will be flexible in accordance with economic and job market conditions," government ministries led by the Ministry of Strategy and Finance said in a joint statement. "All related (government) parties will closely cooperate for an appropriate policy mix."
The plan also comes after President Lee Myung-bak last week urged his cabinet to take a tough stance against inflation and keep it around 3% this year, the midpoint of the BOK's target band of 2%-4%.
"For the economy's stable growth...price stability should be maintained, but onshore and offshore factors for price stability are more formidable this year than before," the joint statement said.
As inflation is expected to rise faster in the first half of this year than in the last six months, fueled by price increases in college tuition and processed food, the government will cut tariff on more items than the 67 planned for this year and freeze public service charges, including on electricity and gas.
Items that will see a tariff cut include coffee beans and powdered milk.
In a bid to tackle rising prices of apartments that are rented with deposit money, it will increase the supply of new apartments and do so earlier than scheduled, and also put unsold apartments of state-run construction firms out for rent to the working class.
The government will also take strong measures to prevent price collusion by industry, and guide telecommunication service providers to increase the amount of free talk time offered to certain mobile telecommunications users, it said.
Annual consumer inflation in Asia's fourth-largest economy remained above the key 3% mark for a fourth consecutive month in December with a 3.5% reading, reflecting higher costs for grains and raw materials.
The BOK expects inflation to accelerate to 3.5% this year from 2.9% in 2010.
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