South Korea's finance ministry flags August inflation risks after July easing

South Korea's finance ministry said Tuesday that July's year-on-year consumer-price inflation eased to 2.8 percent from 3.2 percent in June, citing declines in agricultural, livestock and fisheries products and petroleum prices after price-stabilisation measures.

July's consumer price index fell 0.2 percent from June, its first monthly decline in eight months. Service prices rose, but lower electricity, gas and water charges and industrial goods pulled the overall index down. The ministry estimated that a seventh round of price cuts, which reduced prices by 150 won per litre from June 27, lowered July's inflation rate by about 0.3 percentage point.

"Although inflation has eased, prices remain high after accumulated increases and the burden on households persists, so we must not let down our guard and make every effort," Lee Hyeong-il, first vice minister at the Ministry of Economy and Finance, said.

The ministry expects a base effect from a temporary mobile-phone fee discount in August last year to add about 0.8 percentage point to August's consumer-price inflation rate. It also cited heat waves, other extreme weather, food prices and uncertainty from the Middle East war.

The government plans to designate additional good gas stations and stabilise petroleum supplies and prices through uninterrupted crude-oil imports and adequate storage capacity.

The government will continue an August discount event covering agricultural, livestock and fisheries goods and pursue imports of eggs and mackerel. It may also directly buy mackerel, hairtail and squid for discounted release if prices rise. Officials will monitor vegetables and farmed fish sensitive to heat waves and heavy rain, and plan in September to announce a Chuseok package covering holiday-item prices and support for vulnerable households.