(Bloomberg) -- Inflationary pressures are spilling into the labor market and may push up wages in South Korea later this year, potentially creating a vicious cycle of rising costs, according to a study released by the Bank of Korea.

Inflationary shocks exert a meaningful impact on wages after a lag of four quarters and that means Korea’s labor costs are likely to pick up from the second half of this year, said a team led by Oh Sam-il at the central bank.

The study suggests rising wages present a risk of higher inflation embedding itself in the economy. While the study is not endorsed as the BOK’s official position, it offers another reason for the central bank to consider further rate hikes this year to keep on top of inflationary pressure. 

Last month consumer prices rose at the fastest pace in a decade, fueling concerns over the possible emergence of a spiraling cycle of inflation that feeds wage growth and vice versa.

The BOK has already raised its benchmark interest rate twice this year, including a quarter-percentage-point hike earlier this month, as it seeks to rein in months-long price growth above its target of 2%.

In contrast, central bank policy makers in Japan and Australia have argued that they need to see more signs of wage growth to support sustainable inflation before tightening policy.

The BOK has its next policy meeting on May 26. The bank has scrapped its projection of 3.1% inflation for the year while expecting economic growth to be slower than previously forecast.

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