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South Korea's consumer price inflation was estimated to be affected more by currency movement than by a change in import prices, a report issued by the central bank showed Wednesday.
According to the report by the Bank of Korea (BOK)'s economist, a 1 percentage point change in the dollar/won exchange rate was estimated to raise the country's consumer price inflation by up to 0.1 percentage point over the next nine months.
In local currency terms, a 1 percentage point rise in import prices was estimated to lift the inflation by 0.04 percentage point over the nine-month period, lower than the figure for the currency movement. The estimation was based on the analysis of movements in the dollar/won rate, consumer prices and import prices between 2000 and 2011.
The report noted that the impact of the currency movement on consumer prices were around 2.5 times bigger than the one from import price changes, saying that it was due mainly to the difference in weightings comprising the consumer price index and the import price index.
The consumer price index involves prices for the service sector that are influenced by the currency movement, but the import price index does not include the service prices.
The report said that the impact of the currency movement on the inflation mostly emerges within three months, noting that it would be hard for the monetary policy to ease the upward pressures, which stem from the currency movement, on the consumer price inflation.
