South Korean central bank on Thursday expected the headline inflation to accelerate down the road, raising expectations for possible rate hike later this year.
The Bank of Korea (BOK) said in a statement after the April monetary policy meeting that consumer prices would stay in the low level for the time being due to lower farm goods prices.
Consumer prices rose 1.3 percent in March from a year earlier, higher than a 1 percent growth in the previous month.
The consumer prices stayed below the BOK's mid-term inflation target band of 2.5-3.5 percent for 22 months in a row.
Core consumer prices, which exclude agricultural and petroleum products, increased 2.1 percent on year in March, up from a 1.7 percent rise a month earlier.
Market watchers expected the BOK to raise the benchmark interest rate as early as in the fourth quarter of this year as the U.S. Federal Reserve kept tapering its quantitative easing and hinted at the rate hike in the first half of next year.
Kwon Young-sun, a senior economist at Nomura in Hong Kong, said in a report that the BOK will raise interest rates by 25 basis points to 2.75 percent in December 2014 given his view that the headline inflation will surge to 3.2 percent in the fourth quarter.