(2nd LD) S. Korea's consumer prices rise 3.1 pct in Jan

(ATTN: ADDS finance ministry's forecast for Feb prices at bottom)
SEOUL, Feb. 1 (Yonhap) -- South Korea's consumer prices grew at the fastest pace
in nine months in January as prices of agricultural, dairy and fishery products
increased, a report showed Monday.

According to the report by Statistics Korea, the consumer price index rose 3.1
percent last month from a year earlier, accelerating from a 2.8 percent on-year
advance the previous month.
The increase marks the fastest gain since April last year when prices jumped 3.6
percent and also the first time that price gains exceeded the 3 percent mark over
the same period.
The January figure is still in line with a 3.1 percent gain predicted in a poll
by Yonhap Infomax, the financial news arm of Yonhap News Agency. Core inflation,
excluding volatile oil and food prices, rose 2.1 percent from a year ago, the
report showed.
"A cold spell and heavy snow hurt the supply of vegetables and drove up prices,
contributing in large part to a hike in overall consumer prices," Yang Dong-hee,
head of the price statistics division at the agency, told a press conference.
Agricultural, dairy and fishery product prices jumped 2.4 percent in January from
a year earlier. Compared with a month earlier, they rose 2.6 percent, the report
showed.
Oil costs also sent consumer prices higher by raising the cost of goods produced
in factories.
Prices for manufactured goods jumped 5.4 percent from a year earlier and gained
0.1 percent compared with a month earlier, according to the report.
The nation's consumer prices seemed to have stabilized after peaking at a 10-year
high in July 2008, driven by surging oil and commodity prices. But they have been
on a steady increase since the second half of last year.
The outlook still remains grim as public service bills are likely to rise this
year and as major state-run utility companies are poised to increase their
product prices.
Higher prices could weigh on the government's drive to rejuvenate the nation's
economy through stimulus measures aimed at bolstering consumption, investment and
job creation.
The Seoul government predicts that the economy will expand 5 percent this year
after managing to avoid what many feared would be the first contraction in more
than a decade last year by growing 0.2 percent.
To achieve sustained growth, the government has affirmed that it will maintain
its expansionary macroeconomic policy stance for some time. The Bank of Korea
earlier kept its key interest rate at a record low of 2 percent for an 11th
consecutive month.
The central took a more flexible stance on inflation by broadening its 2010-2012
target inflation range to between 2 and 4 percent from the 2.5 to 3.5 percent
over the previous three years.
The move was intended to provide more leeway for banks to manage their monetary
policy flexibly and better cope with economic uncertainty.
In a separate report unveiled later in the day, the finance ministry said that
consumer price growth will likely slow this month from January as oil costs are
expected to stabilize, though volatility stemming from an imbalance in supply and
demand for agricultural goods could continue.
kokobj@yna.co.kr
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