SEOUL, June 1 (Yonhap) -- South Korea's consumer prices grew at a slower pace in May, but they were still quite higher than the government's inflation target, raising concerns that price hikes still remain a drag on the nation's economic recovery, a report showed Wednesday.

According to the report by Statistics Korea, the country's consumer price index rose 4.1 percent last month from a year earlier, decelerating from the previous month's 4.2 percent gain.

The figure, however, represents the fifth straight month that the consumer prices have jumped over 4 percent, and it is much higher than the government's annual inflation target of 3 percent.

Excluding volatile oil and food costs, core inflation prices increased 3.5 percent from a year earlier, the highest in 23 months since July 2009. They were also up from 3.2 percent tallied for April, the report showed.

South Korea's consumer prices are closely watched as concerns over inflation are deepening among policymakers and experts fearing that fast price hikes could undercut the nation's economic growth momentum going forward.

Soaring crude oil and commodity prices exert upward pressure on inflation as the nation depends heavily on the imports of such materials for domestic need.

In his confirmation hearing on May 25, Bahk Jae-wan, who was recently designated as the new finance minster, said price stability will remain a top priority for the government's economic policies. He noted that the 3 percent inflation target for this year will not be easy to achieve.

Mounting inflationary pressure has prompted some experts to demand that the nation's central bank raise its key interest rates in a bid to keep prices under control.

Earlier, the Paris-based Organization for Economic Cooperation and Development (OECD) joined the move, calling for Korea to hike borrowing costs to help contain inflationary pressure that is mounting due to higher oil and commodity prices.

On May 13, the Bank of Korea (BOK) froze its key interest rate at 3 percent for the second straight month, saying that economic uncertainty such as unstable oil prices and the eurozone debt crisis persists. It will hold a rate-setting meeting on June 10.

The high inflation figure comes as South Korea's economic recovery still remains on track, boosted by strong exports, though recent data shows some mixed signals.

South Korea's economy, Asia's fourth largest, grew 1.4 percent during the first quarter from three months earlier, accelerating from a 0.5 percent gain in the fourth quarter of last year.

Compared with a year earlier, the economy expanded 4.2 percent in the first quarter.

Recent industrial output data, however, painted a less bright picture of the economy, suggesting that the recovery might be losing its steam against the lingering uncertainties at home and abroad.

The nation's industrial output rose 6.9 percent in April from a year earlier, decelerating from a 9 percent growth in March. Output also contracted 1.5 percent from a month earlier, according to government data.

(Yonhap News)