South Korea inflation eases but underlying pressures persist

Folks arrive at Noryangjin Fisheries Wholesale Market in Seoul, South Korea, April 8, 2022. REUTERS/Kim Hong-Ji

SEOUL, Sept 2 (Reuters) – South Korea’s essential inflation charge slowed in August for the primary time in seven months and got here in beneath forecasts, however particulars of the value information launched on Friday bolstered views inflation would keep elevated for some time.

The Statistics Korea information confirmed the patron value index (CPI) rose 5.7% in August from the identical month a yr in the past after a 6.3% achieve in July, a 24-year excessive. It was additionally slower than the median 6.1% rise tipped in a Reuters ballot.

The softening in annual inflation was principally as a consequence of a plunge in international crude costs as the information confirmed costs of oil merchandise tumbling 10.0% in August from July. The weaker oil costs knocked 0.57 proportion factors off the month-on-month inflation charge, leading to a 0.1% retreat in headline CPI, the primary decline since November 2020.

“The info will assist ease issues a few ‘massive step’ charge improve however excessive core inflation and different figures present inflation strain didn’t weaken a lot and won’t accomplish that rapidly,” stated Paik Yoon-min, a fixed-income analyst at Kyobo Securities.

Rhee Chang-yong, governor of the Financial institution of Korea, has stated his financial institution would strive to not increase rates of interest by an even bigger margin than the standard 25 foundation factors when it must tighten financial coverage once more.

Lee Hwan-seok, a deputy governor of the central financial institution, stated at a gathering on Friday that the autumn within the inflation charge was according to the central financial institution’s expectations and that inflation would keep excessive at 5-6% ranges for a while. learn extra

The identical information confirmed annual core inflation, which excludes risky meals and vitality costs, accelerated to 4.0% in August from 3.9% in July, the quickest since February 2009. Core inflation has not slowed since November final yr.

A sub-index measuring service costs – one other indicator of underlying inflation strain – rose 4.1% in August from a yr earlier, up from a 4.0% achieve in July and the quickest since November 2008. It confirmed inflation was nonetheless spreading wider.

Rhee has stated inflation would keep elevated for the time-being and that his financial institution would preserve elevating the coverage rate of interest having lifted it by a mixed 200 foundation factors from record-low 0.5% since August final yr.

Modifying by Stephen Coates and Sam Holmes

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