Oil Price Cap Cuts July Inflation by 0.3 Percentage Point; Vice Finance Minister Says Upside Risks Remain

[Financial News] The seventh cut in the oil price cap is estimated to have eased July inflation by about 0.3 percentage point.
On the 4th, Lee Hyoung-il, first vice minister of the Ministry of Economy and Finance, chaired the vice ministers’ meeting on price issues to discuss July consumer price trends and key features, future inflation risks and responses, and price trends in processed foods.
Lee said, "Consumer prices fell month on month in July for the first time in eight months, and the year-on-year increase eased to the 2% range for the first time in three months." He added, "Thanks to policy efforts such as record-high discount support measures to stabilize livelihoods and lower price caps, both agricultural and fishery products and petroleum prices declined from the previous month."
The seventh price-cap cut is estimated to have reduced July inflation by about 0.3 percentage point. In contrast to the Eurozone, where July inflation released last week accelerated on higher energy prices, South Korea is seeing inflationary pressure ease.
Lee said, "Despite the easing trend, prices remain high because the upward momentum has accumulated over time, and the burden on livelihoods is still significant. We must not let our guard down and should do our utmost." He added, "In particular, uncertainty surrounding the war in the Middle East, the base effect from last year's temporary telecom discount, the impact of abnormal weather such as heat waves, and upside risks from food prices remain. All ministries should make every effort to minimize future upward pressure and ease the burden on households."
Because of the temporary mobile phone bill discount that was in effect for one month last August, the year-on-year increase in mobile phone charges this August is expected to act as a base effect that will raise consumer inflation by about 0.8 percentage point.
Along with operating the price cap, the government plans to continue efforts to stabilize petroleum supply and prices by selecting additional low-cost gas stations, ensuring smooth crude oil imports, and securing reserve capacity.
To stabilize grocery prices, including food costs, the government will continue the largest-ever across-the-board discount campaign for agricultural, fishery and livestock products, which began in July, through August. It will also push ahead with imports of eggs and mackerel without disruption to secure supply and stabilize prices. In particular, for seafood, if prices rise from August, the government will directly purchase and then sell at a discount not only mackerel but also hairtail and squid.
To respond to abnormal weather, the government plans to closely monitor items sensitive to heat waves and heavy rain, such as vegetables and farmed fish, and respond quickly. It will also maintain communication with the food industry, closely review logistics and raw material supply trends, and work to minimize factors that could lead to higher food prices.
Meanwhile, the government plans to prepare without disruption a Chuseok livelihood stabilization package, aimed at stabilizing prices of holiday staples and easing the burden on vulnerable groups, with a target of announcing it in September. Lee said, "Relevant ministries should actively cooperate so that the public can enjoy a comfortable and abundant holiday without worrying about prices."

[email protected] Seo Young-joon Reporter