S. Korea faces low deflation risk: central bank

SEOUL, March 18 (Yonhap) -- South Korea's runs little risk of lapsing into
deflation this year, the central bank said Wednesday, despite signs the United
States and Japan are heading in that direction.
Concerns have mounted that Asia's fourth-largest economy may suffer deflation, or
a persistent decrease in the general price level, as it is plagued by stubbornly
weak domestic demand and falling property prices.
"Some institutions have raised deflationary concerns but the likelihood of
deflation is extremely low," the Bank of Korea (BOK) said in a report.
Basing its prediction on future inflationary probability data, the BOK said
concerns over inflation outweigh those over deflation.
South Korea's inflation growth could slow, however, if the global economic
downturn lasts for a longer period and on a broader scale than expected,
according to the central bank.
The nation's consumer prices unexpectedly rebounded in February, ending seven
months of downturn, as oil price hikes and a weak local currency increased price
pressures.
The won fell nearly 18 percent against the greenback in the first two months of
this year, compared with the end of 2008.
The central bank kept its key rate unchanged at 2 percent this month after six
months of aggressive reductions, due to fears that further cuts would put
downward pressure on the already-weak local currency.
pbr@yna.co.kr
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