South Korean producer inflation in April picked up for the eighth consecutive month to set a near decade high, data showed on Friday, supporting the central bank's decision to resist pressure to cut interest rates.
The producer price index in April jumped 9.7 per cent over a year earlier, accelerating from an 8.0 per cent annual gain in March and marking the fastest rise since 11.0 per cent growth in November 1998, the Bank of Korea's (BOK) data showed.
The data came a day after the BOK held interest rates steady for a ninth month in a row, bucking government pressure for a cut to bolster faltering economic growth, and warned that inflation was likely to stay high.
'This shows why the BOK was so firmly against the finance ministry's pressure and at the same time provides it with strong backing to keep resisting for the time being,' said Kim Jae-eun, an economist at Hana Daetoo Securities.
The producer price index gained 2.6 per cent in April over a month earlier, setting the biggest monthly gain in more than 10 years since January 1998, the data showed.
The government argues that inflation is currently led by global oil and raw materials prices over which it has little control and therefore the central bank should lower interest rates to lift domestic demand.
But BOK Governor Lee Seong-tae told a news conference on Thursday the annual rate of consumer inflation would probably stay above its target set at between 2.5 per cent and 3.5 per cent for several more months.
Ms Kim at Hana called the government's argument misplaced.
'It's wrong to say that we can simply ignore a cost-push inflation and so many countries are already adjusting their policy to fight inflation,' she said.
Australia's central bank hiked interest rates twice this year to curb inflation.
Mr Lee's inflation warnings and expectations that US rates will stay on hold for some time convinced markets the central bank would also keep its base rate steady at 5.0 per cent next month.
June treasury bond futures fell 74 ticks on Thursday and dipped an additional 23 ticks at one point on Friday to hit a six-week low of 107.18.
Resources-poor South Korea imports most of energy and raw materials to feed Asia's fourth-largest economy, while relying heavily on exports by manufacturers such as Samsung Electronics Co and Hyundai Motor Co..
The BOK lifted rates by a combined 1.75 percentage points in seven steps between late 2005 and August last year but has since kept them unchanged to assess the effect of the past tightening and the impact from a US sub-prime mortgage crisis.
The producer price index in April jumped 9.7 per cent over a year earlier, accelerating from an 8.0 per cent annual gain in March and marking the fastest rise since 11.0 per cent growth in November 1998, the Bank of Korea's (BOK) data showed.
The data came a day after the BOK held interest rates steady for a ninth month in a row, bucking government pressure for a cut to bolster faltering economic growth, and warned that inflation was likely to stay high.
'This shows why the BOK was so firmly against the finance ministry's pressure and at the same time provides it with strong backing to keep resisting for the time being,' said Kim Jae-eun, an economist at Hana Daetoo Securities.
The producer price index gained 2.6 per cent in April over a month earlier, setting the biggest monthly gain in more than 10 years since January 1998, the data showed.
The government argues that inflation is currently led by global oil and raw materials prices over which it has little control and therefore the central bank should lower interest rates to lift domestic demand.
But BOK Governor Lee Seong-tae told a news conference on Thursday the annual rate of consumer inflation would probably stay above its target set at between 2.5 per cent and 3.5 per cent for several more months.
Ms Kim at Hana called the government's argument misplaced.
'It's wrong to say that we can simply ignore a cost-push inflation and so many countries are already adjusting their policy to fight inflation,' she said.
Australia's central bank hiked interest rates twice this year to curb inflation.
Mr Lee's inflation warnings and expectations that US rates will stay on hold for some time convinced markets the central bank would also keep its base rate steady at 5.0 per cent next month.
June treasury bond futures fell 74 ticks on Thursday and dipped an additional 23 ticks at one point on Friday to hit a six-week low of 107.18.
Resources-poor South Korea imports most of energy and raw materials to feed Asia's fourth-largest economy, while relying heavily on exports by manufacturers such as Samsung Electronics Co and Hyundai Motor Co..
The BOK lifted rates by a combined 1.75 percentage points in seven steps between late 2005 and August last year but has since kept them unchanged to assess the effect of the past tightening and the impact from a US sub-prime mortgage crisis.
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