SEOUL - SOUTH Korea's annual inflation rate for 2008 hit a 10-year high of 4.7 per cent, well above the central bank's target of 2.5 to 3.5 per cent, official figures showed on Wednesday.

The figure compares to a 2.5 per cent rate in 2007, the National Statistical Office said.

In December the consumer price index rose 4.1 per cent from a year earlier, slowing for a fifth straight month due to falling oil prices.

The eased inflationary pressure gave the central Bank of Korea (BOK) leeway to cut interest rates sharply to counter the global downturn.

Since early October the bank has cut its key interest rate by a total of 2.25 percentage points to an all-time low of 3 per cent.

Its governor Lee Seong-Tae said in a New Year message that the central bank would focus its monetary policy next year on boosting the slumping economy and stabilising financial markets.

His remarks were seen as hinting at more rate cuts. -- AFP