S. Korea's inflationary pressures may moderate further: think tank

SEOUL, May 17 (Yonhap) -- South Korea's inflationary pressures may moderate
further over the next one or two years, a local economic research institute
predicted Sunday.
The forecast by LG Economic Research Institute suggested that monetary
authorities do not need to consider liquidity control measures in the short term,
despite concerns over excessive cash in the market.
South Korea's annual inflation rate rose 3.6 percent in April, marking the
slowest pace in 14 months, according to government data. The rate was slightly
higher than the Bank of Korea's target of 3.5 percent.
Record-low interest rates and the government's stimulus packages helped South
Korea avoided a technical recession in the first-quarter of this year. The
economy grew 0.1 percent in the first quarter, compared with a 5.1 percent
contraction in the fourth quarter of last year.
So far this year, consumer prices have risen mainly due to the South Korean
currency's weakness against the U.S. dollar, LG said.
"As foreign-exchange rates are expected to fall gradually, inflationary pressures
may not be high this year or next year," the institute said.
But LG said monetary authorities should closely monitor the markets, as excessive
liquidity could create asset price bubbles.
If the economy is put back on track, monetary authorities would need to start
absorbing liquidity, LG said.
Last week, the Bank of Korea kept its key interest rate unchanged at a record low
of 2 percent for the third consecutive month.
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