SEOUL: South Korea's central bank said on Tuesday that inflation would remain below its target band of 2.5 to 3.5 percent in early 2014 and that it would closely examine the reasons behind subdued price pressures should they hinder economic growth.
"Should expected inflation fall and create a secondary effect there is a chance it could hurt economic vitality," the Bank of Korea said in its biannual report on inflation, expressing concern that sustained low inflation could damage South Korea's economic output.
South Korean inflation edged up to an average of 1.3 percent last year, far below the central bank's target band, while consumers' inflation expectations for the next 12 months stood at 2.9 percent in January. The low inflation was attributed to temporary supply conditions and changes in policy, rather than low demand, the Bank of Korea said.
However, inflation is expected to rise gradually to come within the target band as price pressures are expected to rise in all sectors, with the exception of petroleum products, the report said.
The central bank said it would closely watch the effects of the US Federal Reserve's decision to taper its stimulus, weakened growth in emerging market economies and fiscal uncertainties in the United States.
The Bank of Korea forecast earlier this month that annual inflation in South Korea is expected to rise 2.3 percent in 2014 and 2.8 percent in 2015 while upside and downside risks to inflation remain neutral.
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