Bank of Korea Governor Lee Ju-yeol said on Thursday, South Korea's consumer price inflation is forecast to remain close to zero for some time, even after the COVID-19 pandemic.
"As for the outlook of future inflation, some major economies' have opened up, but concerns still remain high over a second wave of COVID-19.
With the recovery of global oil prices forecast to be modest, we expect consumer price growth to remain low at around zero percent, for some time being."
But the BOK chief added that the possibility of deflation is low.
South Korea's consumer price growth has been slowing down since February amid the COVID-19 outbreak, and prices actually dropped in May by point-three percent on-year.
This was mainly attributed to the sharp fall in global oil prices, and weak inflationary pressures on the demand side, with the tourism, accommodation and restaurant sectors struggling amid social distancing measures.
The central bank has forecast that consumer prices this year are expected to grow only point-three percent on-year.
The BOK chief explained that in a major health or economic crisis, households and businesses tend to reduce debt and increase savings, which reduces spending and investment.
He also said non-contact transactions which are expected to increase due to COVID-19 can reduce transaction costs and lower prices.
The governor says the central bank plans to keep its current policy for the near future.
"We will maintain our monetary policy stance until domestic economy shows signs of recovering from the COVID-19 pandemic."
He added the central bank will also closely examine how the COVID-19 situation unfolds, and its impact on the global economy, and come up with effective monetary policies to meet the bank's inflation target of two percent.
Kim Jae-hee, Arirang News.