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UPDATE 1-S.Korea Sept CPI up 0.6 pct m/m on typhoon,holiday

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SEOUL, Sept 30 (Reuters) - South Korea's headline inflation rose a provisional 0.6 percent in September, as food prices jumped due to devastating typhoons and Thanksgiving holidays, the National Statistical Office (NSO) said on Monday.

The latest monthly reading compared with a 0.7 percent rise in the consumer price index (CPI) in August -- the biggest gain in 17 months -- and was in line with the average 0.6 percent forecast in a Reuters poll of 10 economists last week.

Weeks of typhoons and monsoon rains in South Korea, which have killed more than a hundred people and damaged crops, were blamed for an upswing in consumer prices.

"Typhoon Rusa and rising demand from the Chusok holidays pushed prices in agricultural products higher, while an end to tax breaks for new car buyers in September also helped the upswing in CPI," an NSO official said.

A rise in oil prices linked to the growing prospect of a U.S. strike against Iraq also fanned inflation. South Korea is the world's fourth largest oil importer and wholly depends on imports of crude.

Year on year, inflation measured by the CPI, rose 3.1 percent in September versus August's 2.4 percent gain and a 2.6 percent climb in the same month last year. Core inflation, stripping out volatile food and fuel prices, grew 2.9 percent year-on-year after a 2.8 percent rise in August.

"Prices in this season are often hit by heavy rains or typhoons but the hit this year was bigger than usual," J.P. Morgan economist Lim Ji-won said before the release of CPI data.

Policy makers are concerned that inflation is on the rise, stoked by firmer house prices and vigorous consumer spending.

The Bank of Korea expressed concerns earlier this month over overshooting prices in 2003 and has hinted at a shift in monetary policy towards tightening.

The central bank decided last week to cut the ceiling on loans to financial institutions by two trillion won for the last three months of 2002 to drain excess liquidity.