South Korea's consumer prices grew at the fastest pace in three years in August, raising concerns that inflationary pressure is building up despite the government's anti-inflation efforts, a report showed Thursday.
According to the report by Statistics Korea, the country's consumer price index rose 5.3 percent last month from a year earlier, quickening from the previous month's 4.7 percent gain.
The figure is the largest growth since August of 2008 when prices rose 5.6 percent. It is also the eighth straight month that the consumer price hike has surpassed the government's annual inflation target of 4 percent for this year.
Core inflation, which excludes volatile oil and food costs, also jumped 4 percent from a year earlier, the largest gain in 28 months. It was up from 3.8 percent tallied for July, the report showed.
"The higher-than-expected price hike in August is attributed to one-off factors such as surging prices for farm products and gold," said Yoon Jong-won, director general of the finance ministry's economic policy bureau.
"We expect that it will go down to around 4 percent after the Chuseok holiday as the prices of vegetables and fruits are likely to stabilize and the recent oil price fall will also be reflected," he added.
The fresh food price index surged 13.8 percent on-year last month, leading the overall price growth, the report showed. Agricultural, livestock and fishery products saw their costs rise 13.3 percent.
Prices for manufactured products also gained 7.1 percent, with oil costs spiking 15.2 percent from a year earlier. Prices in the service sector were up 3.1 percent over the same period, as home rental and public service costs led the gains, the report showed.
The data comes amid mounting worries that the government is losing its battle against inflation, which has remained stubbornly high over the past year.
The government has been placing its top policy priority on taming inflation since the beginning of this year. Rising food and oil prices, however, prompted the government to raise its annual inflation target for this year from 3 percent to 4 percent last June.
The renewed target seems to be getting tougher to achieve as there are few signs of inflationary pressure letting up anytime soon with many other factors poised to drive up prices.
The upcoming Chuseok holiday that falls on Sept. 12 this year is yet another challenge for the government as demand for food and other services usually grows and drives up inflationary pressure. The government recently put major food products on its special watch list to monitor their price movements.
In a hastily arranged meeting with reporters, Vice Finance Minister Yim Jong-yong tried to soothe the concerns, saying that consumer price inflation will likely fall below 4 percent in September as vegetable, livestock and oil price conditions will improve.
Yim added that the government will maintain its current macroeconomic policy related to inflation and growth, while responding to changing economic conditions "flexibly and swiftly."
The August consumer price hike still could be adding pressure on the central bank to raise its key interest rate when its policymakers meet next week.
On Aug. 11, the Bank of Korea kept its key interest rate unchanged at 3.25 percent for the second straight month. Hiking borrowing costs would be a touchy move when economic uncertainties at home and abroad are mounting.
The nation's industrial output grew at the slowest pace in 10 months in July, raising concerns over mounting economic uncertainties, according to government data unveiled on Wednesday.
"There is little chance that the central bank will raise its interest rates this month at a time when there are growing concerns over economic conditions," David Kim, an analyst at Taurus Investment & Securities, said. "It is expected to place more emphasis on economic conditions than price stability for the time being."