South Korea's central bank said on Friday that it will focus on stable inflation in setting interest rates next year, indicating a further rate hike.

The Bank of Korea (BOK) said in its monetary policy report that it will continue to focus on stable inflation in setting next year's interest rates to let inflation converge to the target level of 2 percent. The BOK forecast that consumer prices would continue to rise next year and far exceed the target level despite the expected fall in the domestic economy's growth rate.

The central bank expected that the consumer price inflation would be in the mid-three percent range and the core inflation, which excludes food and energy costs, would be in the late-two percent range.

The country's consumer price index (CPI) rose 5.0 percent in November from a year earlier, hovering above 5 percent for the seventh consecutive month.

The finance ministry forecast that the headline inflation would slow down from 5.1 percent this year to 3.5 percent next year due to lower energy prices and weaker domestic demand. The BOK began to tighten its monetary policy stance in August last year, hiking the benchmark interest rate from a record low of 0.5 percent to 3.25 percent.