[위크리뷰]Lee Joo-yeol hints at a key rate hike in November… “The KEPCO deficit is due to the failure to raise electricity rates”

This week, the Bank of Korea, KEPCO and other government audits… Import prices hit highest in 7 years and 7 months due to high oil prices

[세종=아시아경제 권해영 기자] Bank of Korea Governor Lee Ju-yeol strongly hinted at a key rate hike in November. Import prices soared to the highest level in 7 years and 7 months due to rising international oil and raw material prices. Jeong Seung-il, president of KEPCO, whose operating performance is expected to deteriorate due to rising oil prices, said that KEPCO’s financial structure was deteriorating because electricity rates could not be raised above cost.

The central bank hints at an interest rate hike in NovemberIn a parliamentary audit on the 15th, Governor Lee Ju-yeol of the BOK said, “According to the current economic forecast, it is expected that there will be no major difficulties even if the base rate is raised in November.” The BOK will hold the last Monetary Policy Committee of the year on November 25th. Governor Lee mentioned that “an additional increase may be considered at the next meeting” immediately after the MPC held the base rate freeze in October.

If the BOK raises the base rate by 0.25%, it will rise from the current 0.75% per annum to 1% per annum. The return of the base rate to 1% is the first in one year and eight months since it was lowered to 0.75% in March 2020, right after the outbreak of Corona. The market expects the BOK to raise interest rates to 1.5% per annum next year. If the rate of interest rate hike is accelerated, the interest burden on borrowers is also expected to increase.

◆KEPCO President “KEPCO’s deficit is due to the failure to adjust rates” =KEPCO President Jeong Seung-il explained in the National Inspection on the 12th that “the cost of electricity generation was not properly reflected in the rate” to Shin Jeong-hoon, a member of the Democratic Party of Korea, asking what was the cause of KEPCO’s chronic operating loss. He also expressed the need for a cost-reflecting rate system that is not swayed by political logic for energy supply and demand as well as operating losses.

He said, “We will do something that can be tightened even a little, but it is unreasonable to think that the loss was due to negligent management. It didn’t work,” he emphasized.

KEPCO internally It is expected to record a loss of 3.849 trillion won on a consolidated basis this year. This is more than 1 trillion won more than the deficit of 2.7981 trillion won in 2008, when the global financial crisis occurred, and it is expected to be the largest loss ever. cause is energy prices are rising. International oil prices have soared since the beginning of this year, surpassing $80 per barrel for the first time in seven years. Last year, the government introduced a ‘fuel cost indexing system’ that periodically reflects the rise and fall of fuel costs in electricity rates, but it persisted with the freeze in the second and third quarters despite the rise in oil prices, and reluctantly raised them in the fourth quarter.

Jeong Seung-il, president of Korea Electric Power Corporation, is present at the National Assembly’s Committee on Industry, Trade, Resources, and Small and Medium Venture Businesses held at the National Assembly on the 12th to report on the government audit of Korea Electric Power Corporation. / Reporter Dong-Joo Yoon, doso7@

High oil prices, the highest in 7 years and 7 months =According to the ‘September Export-Import Price Index’ announced by the BOK on the 14th, the import price index (provisional value in Korean won, the 2015 level of 100) last month was 124.58, up 2.4% from August (121.61). The index itself is the highest since February 2014. The strong import price was largely affected by oil prices. Mining products rose 5.1%, of which crude oil rose 5.3% from the previous month.

The export price index was 114.18, up 1.0% from the previous month. Coal and petroleum products (6.0%), chemical products (1.4%), and electrical equipment (1.1%) rose from August, while computer, electronic and optical equipment fell 0.5%.

An increase in import prices due to an increase in oil prices leads to an overall increase in domestic prices. Ahn Dong-hyeon, a professor of economics at Seoul National University, said, “When raw material prices rise, a company’s production costs rise.” There is a high possibility that public prices, such as electricity and gas rates, which the government is restricting to increase for price control, will rise one after another.

◆A rise in the number of employed…Job market ‘Has entered with Corona =According to ‘September 2021 Employment Trends’ released by the National Statistical Office on the 13th, the number of employed people last month was 27,683,000, an increase of 671,000 from the same month of the previous year. The increase in the number of employed people since March continued for seven months, the largest increase since March 2014 (726,000 people). The overall employment rate for those aged 15 and over was 61.3%, up 1.0 percentage point from the same month last year. Statistics Korea analyzed that the number of employed people increased and the unemployed and inactive population decreased due to non-face-to-face digital conversion, strong exports, and a base effect.

The number of unemployed was 756,000, down 244,000 from a year earlier. The unemployment rate fell 0.9 percentage points to 2.7%, the lowest level in eight years since September 2013 (2.7%) as of the same month. The economically inactive population decreased by 132,000 to 16,685,000, the seventh consecutive month of decline from March. On the other hand, it was still difficult for vulnerable groups such as the self-employed and temporary workers. Among non-wage workers, the number of ‘alone bosses’, who are self-employed with no employees, increased by 22,000, but the number of self-employed with employees decreased by 48,000.

By Kwon Hae-young, staff reporter roguehy@asiae.co.kr