South Korea's consumer price growth falls to 14-year low

South Korea's consumer price inflation fell last month to the lowest in around 14 years due to a fall in farm goods and oil product prices, a government report showed Monday. Consumer prices rose 1 percent in May from a year earlier after gaining 1.2 percent in the prior month, according to a report by Statistics Korea. From a month before, the prices were unchanged. The on-year figure was the lowest since September 1999 when the prices increased 0.8 percent, and stayed in the 1-percent range for seven straight months. Lower prices of agricultural products and crude oil led the continued decline in the consumer price inflation. Farm goods prices retreated 3.7 percent in May from a year earlier, and the oil product prices slid 2.6 percent over the cited period. Dubai crude, South Korea's benchmark, averaged 100 U.S. dollars per barrel in May, down 2.6 percent from the prior month. Vegetable prices sank 9 percent in May from a month earlier, with those for fruits and cereals falling 1.3 percent and 0.3 percent each. The so-called "livelihood price" index, which reflects the costs of key daily necessities, rose 0.2 percent on-year in May after gaining 0.7 percent in the previous month. The reading was the lowest since the related data began to be complied in 1996, and stayed below 1 percent for six straight months. Core consumer prices, which exclude agricultural and oil product prices, advanced 1.6 percent in May from a year earlier, quickening from a 1.4 percent gain in the prior month. "Favorable weather conditions and lower global oil prices drove down the prices of farm goods and oil products," the Ministry of Strategy and Finance said in a report. "Public service prices stayed at a stable level due to policy effects." The ministry forecast the consumer price inflation would show a stable picture for the time being given favorable weather conditions boosted shipments of farm goods and international commodity prices stayed at a stable level. Market watchers said the stable headline inflation would support another rate cut. Bank of Korea (BOK), South Korea's central bank, lowered its benchmark interest rate by 25 basis points to 2.5 percent at the May monetary policy meeting. "We expect the BOK to keep its base rate unchanged for the time being as fiscal stimuli should boost the economy from the second quarter of this year," Suh Dae-il, an economist at KDB Daewoo Securities in Seoul, said in a report. "Expectations of a rate cut should still linger unless exports improve and inflationary pressures build." The finance ministry earmarked 17.3 trillion won (15 billion U. S. dollars) in supplementary budget after slashing its 2013 growth outlook from 3 percent to 2.3 percent in mid-April. The Organization for Economic Cooperation and Development also lowered its outlook for the country from 3.1 percent to 2.6 percent. The South Korean economy expanded 0.9 percent in the first quarter, posting a growth rate of less than 1 percent for eight straight quarters.