South Korean inflation hits 15-year low, fuelling deflation worries

People walk through the Hongdae shopping district at night in Seoul, South Korea. The country's inflation hit its lowest level in more than 15 years in February owing to slumping oil prices, state data showed Tuesday, fuelling concerns about deflatio
People walk through the Hongdae shopping district at night in Seoul, South Korea. The country's inflation hit its lowest level in more than 15 years in February owing to slumping oil prices, state data showed Tuesday, fuelling concerns about deflation in the country. -- PHOTO: BLOOMBERG

SEOUL (AFP) - South Korea's inflation hit its lowest level in more than 15 years in February owing to slumping oil prices, state data showed Tuesday, fuelling concerns about deflation in the country.

Consumer prices rose 0.5 per cent in February from a year earlier - further slowing from January's 0.8 per cent, state-run Statistics Korea said.

February's figure is the lowest since July 1999 when it rose 0.3 per cent.

Core inflation, which excludes oil and food prices, came in at 2.3 per cent, also slowing from January's 2.4 per cent.

Inflation has remained stubbornly below 1 per cent for three consecutive months because of the slump in global oil prices, which have lost about 50 per cent of their value since June. Asia's fourth-largest economy imports nearly all of its energy needs from overseas.

Prices of petrochemical products dropped 24 per cent year on year, while utilities service fees slid 2.5 per cent.

Inflation has been stuck below the central Bank of Korea's target range of 2.5-3.5 per cent for almost three years and it now faces pressure to cut interest rates - already at more than four-year lows of 2.0 per cent - to ward off deflation.

The bank in January slashed its economic growth forecast for this year to 3.4 per cent from the previous 3.9 per cent, while it lowered its inflation outlook to 1.9 per cent from the 2.4 per cent previously stated.