Power bills have to go up, although inflation could hit above 6%: fin min

[Photo by Park Hyung-ki]

Inflation in South Korea could hover above 6 percent for the first time in nearly 24 years from June to August, but electricity bill inevitably would have to be raised as not to worsen the deficit at state utility monopoly, said the country’s finance chief said Sunday.

“Consumer price gain against a year ago period could shoot above 6 percent in June or July and August.,” the deputy prime minister for economy and finance Choo Kyung-ho said in a televised program Sunday. “Strong prices will persist for a considerable period.”

The country’s consumer price index gained 5.4 percent on year in May in the fastest rise in 14 years. A reading above 6 percent in June will be the first since 6.8 percent in November 1998 in the wake Asian financial crisis.

“Korea inevitably comes under the influence of high oil, commodity and grain prices. Since the inflationary pressure mostly comes from external factors, we could come to some relief if international prices ease. But that may not happen for the time being,” he added.

Amid dearth of policy options, the economy minister pleaded to employers “not to raise wages too much” as wage and price rise can further fan inflation during a meeting with business organization leaders.

Inflation has been accelerated by Russia’s invasion of Ukraine as Korean heavily relies on imports for fuel and food sources

Rate increases also have fastened to contain prices.

In May, the base rate went up to 1.75 percent through incremental lifting from a record low 0.5 percent since August last year. Bank of Korea officials have been hinting a raise beyond the usual 25-basis point in upcoming meetings to match aggressive tightening pace by the U.S. counterpart. The next rate-setting meeting is on July 13.

Choo implied the government would have to endorse a hike in electricity fees as urged by the Korea Electric Power Corp. after putting off the decision last week, calling for more aggressive cost-saving and streamlining action to lessen its snowballing losses.

“Electricity bills should be raised,” Choo said. “We plan to announce a plan that includes an adequate level of hike in the power rates.

The Ministry of Trade, Industry and Energy will announce its fuel cost adjustment fee for the third quarter on Monday 3 p.m. KEPCO has asked the government for a fee hike of 3 won ($0.002) per kilowatt hour. The government is likely to accept the proposal given that KEPCO has logged record 7.8 trillion won in losses in the January-March period and could face as much as 30 trillion won in losses by the year end if current trend continues.

[ㄏ Maeil Business Newspaper & mk.co.kr, All rights reserved]