Korea Inflation


Inflation falls to 14-year low

In October, consumer prices fell 0.28% over the previous month, which contrasts the 0.19% rise observed in September. The reading, which marks the first fall in four months, reflects lower prices for food and non-alcoholic beverages as well as for clothing and footwear.

Annual inflation inched down from 0.8% in September to 0.7% in October, undershooting market expectations of 1.0%. The annual reading represents the lowest level since July 1999 and sits well below the Central Bank's target range of 3.0% plus/minus 0.5 percentage points, providing the Bank of Korea with ample scope to cut interest rates going forward.

The core inflation index, which excludes more volatile items such as fresh food and energy, was unchanged over the previous month (September: 0.4% month-on-month). Meanwhile, annual core inflation in October remained at September's 1.6%.

The Central Bank sees annual average inflation at 1.2% this year. For 2014, the Bank expects inflation to average 2.5%. FocusEconomics Consensus Forecast panelists expect inflation to average 1.6% in 2013, which is unchanged from last month's forecast. According to the panel, average inflation should reach 3.0% in 2014.

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Korea Inflation Chart

Korea Inflation October 2013

Note: Month-on-month and year-on-year variation of consumer price index in %.
Source: KOSTAT-KOSIS and FocusEconomics calculations.

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