Home Fixed interest Inflation in South Korea declines but underlying pressures persist

Inflation in South Korea declines but underlying pressures persist

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People arrive at the Noryangjin Fisheries wholesale market in Seoul, South Korea, April 8, 2022. REUTERS/Kim Hong-Ji

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SEOUL, Sept 2 (Reuters) – South Korea’s core inflation rate slowed in August for the first time in seven months and came in lower than expected, but details of price data released on Friday bolstered sentiment. view that inflation would remain high for some time.

Statistics Korea data showed the consumer price index (CPI) rose 5.7% in August from the same month a year ago after rising 6.3% in July, a peak in 24 years. It was also slower than the 6.1% median rise reported in a Reuters poll.

The slowdown in annual inflation was mainly due to a fall in global crude prices, with data showing that prices for petroleum products fell 10.0% in August compared to July. Lower oil prices sent the month-on-month inflation rate down 0.57 percentage points, driving the headline CPI down 0.1%, the first drop since November 2020 .

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“The data will help ease concerns about a ‘significant’ rate hike, but elevated underlying inflation and other numbers show that inflationary pressure hasn’t eased much and won’t do so as quickly” , said Paik Yoon-min, fixed income analyst at Kyobo. Securities.

Rhee Chang-yong, governor of the Bank of Korea, said his bank would try not to raise interest rates by more than the usual 25 basis points when it needed to tighten monetary policy again. .

Lee Hwan-seok, deputy central bank governor, told a meeting on Friday that the decline in the inflation rate was in line with the central bank’s expectations and that inflation would remain high at levels of 5 to 6% for a while. Read more

The same data showed annual core inflation, which excludes volatile food and energy prices, accelerated to 4.0% in August from 3.9% in July, the fastest since February 2009. Core inflation has not slowed since November of last year.

A sub-index measuring services prices – another gauge of underlying inflationary pressure – rose 4.1% in August from a year earlier, compared with a 4.0% gain in July and the faster since November 2008. It showed that inflation was continuing to spread.

Rhee said inflation would remain high for the time being and his bank would continue to raise the key interest rate after raising it a combined 200 basis points from the record low of 0.5% since August last year. ‘last year.

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Editing by Stephen Coates and Sam Holmes

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