South Korean policymakers on guard as inflation accelerates faster than anticipated
South Korean Economy
August saw an increase in South Korea’s annual consumer inflation to 3.4 per cent, while the month-over-month rate reached its highest level since early 2017. Due to this, policymakers are on guard, keeping a look out for any sustained price increases.
The Bank of Korea (BOK) maintained its interest rates for a fifth consecutive meeting last month as it continued to place a high priority on price stability in the face of elevated growth concerns.
After increasing by 0.1 per cent the month before, the consumer price index (CPI) increased by 1.0 per cent in August, according to official data released on Tuesday, exceeding the median increase of 0.3 per cent predicted by a Reuters survey.
The rate of annual inflation, which increased for the first time in seven months and exceeded the economists’ forecast of 2.7 per cent, was the fastest since April. It came after a 2.3 per cent increase in July, the smallest increase in two years.
The BOK has predicted that consumer inflation will likely pick up in August and September to approximately 3 per cent before declining once more, so the most recent numbers shouldn’t come as a surprise to policymakers.
The finance ministry commented on the report, stating that while temporary factors like bad weather and an increase in global energy prices had an impact on the inflation rate, the overall decreasing trend in prices remained consistent.
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Prices for petroleum goods increased 8.1 per cent during the course of the month, agricultural prices rose 10.5 per cent, and prices for public services increased 0.5 per cent.
On an annual basis, Core CPI, which excludes volatile food and energy costs, increased by 3.3 per cent, remaining constant from the previous month.
Previous inflation rates
Prior to the recent development, South Korea’s inflation rate had decreased in July to its lowest level in more than two years, providing further proof that the central bank is making progress in its campaign to reduce price hikes.
Data from the statistics agency indicated that consumer prices increased 2.3 per cent from a year earlier, slowing from June’s 2.7 per cent increase. According to economists, inflation would be 2.4 per cent.
Headline price increase was expected to drop down in July, pick up again in August, and fluctuate about 3 per cent through the end of the year, according to the Bank of Korea’s prediction. The recent data will is crucial for central bank when discussing the interest rate policy.
(With inputs from agencies)
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