Consumer Inflation in South Korea Slows

By Jihoon Lee
SEOUL (Reuters) – South Korea’s consumer inflation slowed in August to the weakest rate in nearly 3-1/2 years, as official data revealed on Tuesday, supporting market expectations for an easing of monetary policy as early as next month.

The consumer price index (CPI) rose 2.0% from a year earlier, down from 2.6% the previous month, marking the slowest annual rise since March 2021. This figure matched the median 2.0% increase projected in a Reuters survey of economists and aligns with the central bank’s medium-term inflation target of 2%.

Vice Finance Minister Kim Beom-seok commented, “Going forward, unless there is any additional shock from weather conditions or global oil prices, consumer inflation is expected to stabilize in the lower 2% range.”

Last month, the Bank of Korea maintained interest rates at their highest in nearly 16 years, but revived expectations for easing policy, potentially occurring as soon as October, due to concerns regarding growth overshadowing inflation worries.

The central bank stated that Tuesday’s data indicated inflation was stabilizing more rapidly than in other major economies, anticipating that prices would trend steadily.

Analyst Ahn Jae-kyun from Shinhan Securities noted, “The data supports a rate cut in October, which is seen most likely for now, although it is still not certain due to increasing household debt.”

On Tuesday, South Korea’s treasury bond yields edged down after three consecutive sessions of gains.

On a monthly basis, the CPI increased by 0.4%, the fastest in six months, following a 0.3% rise the previous month, exceeding economists’ forecasts of a 0.3% increase.

The core CPI, excluding volatile food and energy items, rose 2.1% from a year earlier, a slowdown from the prior month’s 2.2% rise, marking the weakest growth since November 2021.