By Cynthia Kim

SEOUL (Reuters). -South Korea’s annual inflation exceeded the central bank’s forecasts this year and soared up to a decade high, proving that policymakers are finding it harder to manage prices and boosting support for interest rate increases in 2021.

According to government data, Friday’s 2.5% consumer inflation rate was the highest since 2011. It is also higher than 0.5% for 2020.

This is better than the Bank of Korea’s November projection of 2.3%.

Consumer prices rose 3.7% in December compared to a year ago, slightly slower than the 3.8% increase in November a decade earlier and bettering the 3.6% gain in a Reuters poll.

Inflationary pressures in Asia’s fourth largest economy are being driven by persistent supply disruptions and rising services spending. There is also speculation that the BOK may raise interest rates during its Jan. 14 policy meeting.

The BOK increased interest rates by 1.00% for the second consecutive time since the pandemic started on Nov. 25 and revised its inflation outlook to reflect rising consumer prices and household debt.

After a gain of 2.4% a month prior, December saw a 2.6% rise in service costs. Fresh food prices rose 6.7% after November’s 5.6% increase.