SEOUL, Jan 28: South Korea’s central bank said on Thursday inflation at home faces mixed risks from a number of factors like oil and agriculture, while potentially weak private consumption adds to the risk of inflation falling below the central bank’s target. The Bank of Korea said in a regular report on inflation that the economy is expected to continue its recovery based on consumption, but there is a high level of uncertainty over its potential to grow. The report comes as policymakers rush to address concerns that domestic consumption may slacken early this year as the effects of government measures adopted in 2015 to boost consumer spending taper off. Finance Minister Yoo Il-ho stressed earlier this week the importance of frontloading government spending in the first quarter of the year to keep momentum alive. Downside risks included domestic demand that could turn bad but also increased competition among oil producing countries cutting into oil prices, and the global economy cooling and thereby cutting oil prices further, the central bank report said. South Korea is a major oil refiner and exporter of refined products. Inflation also faced a risk of quickening if oil prices possibly jumped on increased geopolitical risks in the Middle East and rising prices at home for agricultural products. The central bank said farm product prices are likely to keep rising in the near term as growers of popular vegetables reduce the land under cultivation to maintain price competitiveness. The BOK currently sees inflation at 1.2 percent in the first half of the year and 1.5 in the latter half. It sees inflation in 2016 at 1.4 percent and 2.0 percent for 2017. (AGENCIES)
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