The gap with the US price index widened further as the Bank of Korea raised the interest rate by 0.5%p and adhered to the method of excluding the consumer price index for self-living costs.
The US Federal Reserve expects higher housing costs to continue to push inflation this year, with higher housing prices being the biggest factor in controlling interest rate hikes.
"Rising housing costs are expected to continue pushing inflation up this year," the Wall Street Journal reported on Wednesday. According to the Consumer Price Index, overall annual inflation rose to 8.6% in May, while core inflation excluding unstable food and energy costs stood at 6%.
On the 13th, Lee Chang-yong, governor of the BOK, said, "I thought that inflation expectations would be lowered by raising the price by 50 basis points, assuming that inflation will rise by a little over 6% for the next few months, and that it will stop slightly from the second half of the third quarter." There is a premise that it is desirable to go gradually by 25 bps,” he said at a press conference with the Monetary Policy Committee.
The Bank of Korea's price index is 6% of the consumer price index excluding the cost of owning housing, so when converted to the US consumer price index, it appears to be in the range of 9%-10%.
Korea mimics the economic systems of the United States and Japan and adopts the Cold War command economy, which controls wage increases in the light industry by excluding the cost of housing from the price index.
When the cost of self-living is reflected in the inflation rate, it usually rises by more than 30%, threatening the low-wage system for urban workers. rental) has grown rapidly as a growth model.
In the establishment of a high-growth system based on low wages, the cost of self-living has been transferred from interest rates to the real estate market, and high-priced urban housing has become a means of increasing the added value of apartments in Seoul driven by the rise in high prices.
The Park Chung-hee regime's low-wage-dependent high growth is a long-term system in which bureaucrats set interest rates 2-3%p higher than in the US to separate urban low-wage and high real estate prices.
Under the Moon Jae-in regime, the National Statistical Office said, “Housing was excluded because it is a speculative good and a capital good” as to the reason for excluding private housing costs from the consumer price index.
Although the Moon regime insisted on ‘reform in pursuit of rent profit’, it refused to reflect the price index of self-contained housing costs.
Then, the estate tax and housing tax, which are included in the cost of owning a home, were imposed.
Korea's unemployment rate in June was 3%, the same as that of the United States, but 56% of new hires aged 60 or older accounted for 472,000, indicating that the low-wage employment structure was fixed.
Previously, the number of employed people in May increased by 459,000 people over the age of 60, 49%, in June, and the proportion increased in absolute terms.
In June, compared to 472,000 people aged 60 and over, 245,000 people in their 50s, who ranked second, were less than half, 117,000 people in their 20s, 18,000 people in their 30s, and 2,000 people in their 40s.
The increase in the number of employed people in May increased from 49% (459,000 people) over 60 years old to those in their 50s (239,000 people), 20s (185,000 people), and 40s (36,000 people), compared to the worsening rate in June. do.
In June, only the health and social welfare service industry (177,000 people, 6.8%), manufacturing (158,000 people, 3.6%), and transportation and warehousing industries (126,000 people, 8.0%) increased, while government support and loan support were concentrated. , the financial and insurance industry (-59,000 people, -7.2%), wholesale and retail business (-37,000 people, -1.1%), and associations and other personal service businesses (-16,000 people, -1.4%) decreased. .
"President Biden and Chief Representative, as White House officials dominate economic news headlines for months with job reports and new wage data, the administration is expressing cautious optimism that the economy won't fall into a recession this year," the Washington Post wrote. Claims that economic growth and employment have been strong enough to overcome the Fed's move to raise rates in the past few months have been skeptically denied by many economists and Wall Street analysts who have witnessed growing signs of an economic slowdown at home and abroad." reported on the 10th.
The Washington Post continued, “The unemployment rate in June was 3.6%, which is the same as the previous month, and in February 2020, before the coronavirus, it was 3.5%. The average hourly wage, which affects inflation, rose 5.1% over the same month last year and rose 5.2% in May.”
Progressive economists in the United States are increasingly insisting that maintaining the unemployment rate of 3% will increase the pressure on wages from inflation due to the limited labor shortage market, adding to the inflationary pressure and inducing economic recession.
On the 28th of last month, Deputy Prime Minister Choo Kyung-ho told the Korea Economic Daily, "Excessive wage increases not only intensify the high inflation situation, but also widen the wage gap between large companies and SMEs, increasing the relative deprivation of small and medium-sized enterprises and the working class." ' he requested.
The command economy was restored.
The interest rate difference between Korea and the US has been 0.50-0.75%p, and if the US raises the interest rate on the 27th, Korea will get even lower.