© Reuters. FILE PHOTO: Office workers pick up lunch boxes at a convenience store in Seoul, South Korea, June 24, 2022. Picture taken June 24, 2022. REUTERS/ Heo Ran
By Jihoon Lee
SEOUL (Reuters) – South Korea’s consumer prices for February grew at their slowest pace in 10 months, bolstering views that the central bank is done with its current policy tightening cycle after it held rates steady last month.
The consumer price index rose 4.8% in February from a year before, Statistics Korea data showed on Monday, easing from January’s 5.2%. It was lower than 5.1% tipped in a Reuters poll, and was also the lowest rate since April 2022.
By product category, prices of livestock products fell 3.2% from the previous month and petroleum products slid 1.3%, dragging the inflation rate lower.
The inflation index rose 0.3% on a monthly basis, compared with 0.8% in the previous month and 0.5% expected by economists.
“It was encouraging that the rising pace of private service prices slowed, lowering the possibility of additional rate hikes by the central bank, at least on the domestic side,” said Ahn Jae-kyun, a fixed-income analyst at Shinhan Securities.
Annual core inflation, which excludes volatile food and energy prices, inched down to 4.0%, from 4.1% a month before, and hit the lowest since August, suggesting easing underlying price pressure.
The Bank of Korea said in a statement after the CPI release that the February data came in as expected and that the inflation rate would fall significantly in March on high base effects.
The BOK held interest rates steady last month, after a year of uninterrupted hikes, and said the monetary tightening campaign would not resume if inflation followed an expected path towards moderation.
Finance Minister Choo Kyung-ho separately said that the inflation slowdown would become clearer going forward, unless there were an external shock.
The South Korean three-year treasury bond futures rose as much as 0.24 points to 103.49 during the morning session, also helped by a fall in U.S. Treasury yields over the weekend.
(This story has been refiled to correct typographical error in paragraph 2)
Read More
South Korea’s inflation ticked down to its slowest annual pace in 10 months in March, reinforcing expectations for a pause in a year-long series of rate hikes.
The data issued by the Bank of Korea showed that the average consumer price index rose 1.9 percent in March from a year earlier, slowing down from 2.0 percent posted in February. This was the weakest rate since May last year and was mainly attributed to costlier food costs.
The central bank’s “Core” inflation, excluding food and energy prices, also rose 1.7 percent in March, marking the slowest growth since October, the bank said.
The bank noted that the march figure was in line with the market consensus and predicted that inflation is likely to remain stable in the near to mid-term. The governor of the bank, Kim Choong-soo said in a policy meeting this week that the inflation rate will stay in around the target level at least until April.
Financial markets now expect the bank to pause its year-long hike cycle in a bid to assess the economic situation. The bank has increased the key interest rate by a total of 1.25 percentage points in the past 10 months, starting in May 2011. The central bank is expected to make its next policy decision April 25.
As the inflation rate remains lower than the actual inflation target of 2.5 percent — 4.0 percent, the central bank is likely to refrain from pushing up rates at least until the third quarter.
The central bank said that the government’s fiscal austerity measures may have placed a downward pressure on underlying prices and the present data suggests that slower economic growth may also be at play.
The data will provide respite to the central bank as it works to heighten public confidence in the Korean economy.
