South Korea's consumer price growth slowed in July to the lowest in more than 12 years due to falling oil product prices, stable farm goods prices and continued policy effect, a report showed Monday.

Consumer prices advanced 1.5 percent in July from a year before, down from a 2.2 percent on-year gain tallied in the previous month, according to Statistics Korea. From a month earlier, the prices were down 0.2 percent.

The on-year rise was the lowest since 1.1 percent tallied in May 2000, and fell below the 2 percent level for the first time since July 2009 when the headline inflation recorded 1.6 percent. The figure also stayed below the midpoint of Bank of Korea (BOK)' s inflation target band of 2-4 percent for five straight months.

The BOK cut its policy rate by 25 basis points (bps) to 3 percent at the July rate-setting meeting, altering the rate for the first time in 13 months. The downward stabilization of the consumer price inflation was believed to raise scope for the central bank to cut rates further within this year.

Core consumer prices, which exclude volatile agricultural and oil product prices, rose 1.2 percent on-year in July, down from a 1.5 percent on-year advance in the previous month, while the OECD- method coreCPI, excluding food and energy prices, gained 1.2 percent last month, down from a 1.4 percent increase in June.

The slower consumer price inflation was attributed to falling oil product prices, stable agricultural product prices and the persistent policy effect. The South Korean government was offering subsidies for school meals and childcare fees, sending the private service prices to remain at the low level.

Service sector prices rose 1.1 percent in July from a year earlier. Public service prices edged up 0.3 percent on-year in July, with private service charges advancing 0.6 percent last month, but the price hike in the housing rental services stayed at the high level of 4.2 percent over the same period.

Among the service sector items, prices for using childcare facilities plunged 34.0 percent on-year in July, and prices for school meal tumbled 19.2 percent as the government widened its free school meal program. Preschool tuitions dropped 11.1 percent last month, and the telecommunication fees retreated 6.4 percent as domestic wireless carriers lowered their service charges in a bid to meet the government's efforts to tame inflation.

Manufactured product prices rose at a slower pace due to falling petroleum product prices. Prices for manufactured products gained 1.4 percent on-year in July, down from a 3.1 percent on- year advance tallied in the previous month.

Of the manufacturing goods, petroleum product prices declined 0. 7 percent in July from a year earlier, down from a 5.1 percent jump tallied in June. Pharmaceutical product prices dropped 13.5 percent on-year last month, with prices for TVs tumbling 21.6 percent.

Prices for agricultural, livestock and fishery products rose 1. 5 percent on-year in July, down from a 5.8 percent gain tallied in June. The prices declined 1.6 percent on an on-month basis.

Agricultural product prices jumped 7 percent on-year in July, but the prices declined 2.2 percent on an on-month basis. Fishery product prices gained 2.7 percent in July from a year earlier, but livestock product prices plunged 8.8 percent last month on an on- year basis.

The fresh food price index, a gauge of fruits and vegetables, climbed 3.0 percent on-year in July, down from a 11.0 percent on- year gain tallied in the previous month. Fresh fruit prices jumped 7.6 percent last month, but vegetable prices fell 1.0 percent.

Prices for electricity, water and gas surged 6.2 percent on- year in July, up from a 4.2 percent gain in June. The state-run Korea Electric Power Corp. proposed to raise electricity prices by 10.7 percent this year. If approved by the government, the electricity price hike will boost the consumer price growth.