Korea Inflation


Inflation falls to 14 year low in May

In May, consumer prices remained unchanged over the previous month, which followed the 0.1% fall recorded in April. The reading mainly reflects higher prices for clothing and footwear, which were offset by lower prices for transportation.

Owing to the monthly flat figure, annual inflation inched down from 1.2% in April to 1.0% in May. The reading matched market expectations and marked the lowest level in 14 years. As a result, inflation moved further below the Central Bank's target range of 3.0% plus/minus 0.5 percentage points, providing the Bank of Korea with more scope to cut interest rates going forward.

The core inflation index, which excludes more volatile items such as fresh food and energy, rose 0.4% over the previous month, contrasting the flat reading seen in April. As a result, annual core inflation increased from 1.4% in April to 1.6% in May.

The Central Bank sees annual average inflation at 2.3% this year. For 2014, the Bank expects inflation to average 2.8%. FocusEconomics Consensus Forecast panellists expect inflation to average 2.6% in 2013, which is unchanged from last month's forecast. According to the panel, average inflation will reach 3.0% in 2014.


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Korea Inflation Chart

Korea Inflation May 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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