Korea Inflation May 2016


Inflation falls to eight-month low in May

In May, consumer prices rose 0.1% over the previous month, which mirrored an increase in April. The National Statistics Office of Korea (KOSTAT) reported that higher prices for food and non-alcoholic beverages, transportation, as well as recreation and culture were the main drivers behind the monthly increase.

Despite the monthly increase, inflation fell from 1.0% in April to 0.8% in May, which, according to KOSTAT, represented the lowest inflation rate since September 2015. The 12-month average of the annual variation in inflation was 0.9% in May (April: 0.9%). Inflation continues to hover well below the Central Bank’s target range of 2.5%–3.5%. Persistent weak inflationary pressures have caused the Bank of Korea to miss its inflation target consistently in the past three years. As a result, in December 2015, the Central Bank set a lower target band of 2.5%–3.5% for the period between 2016 and 2018.

Core consumer prices, which exclude fresh food and energy prices, rose 0.2% May compared to the previous month, which came in above April’s 0.1% increase. Core inflation fell from 1.8% in April to 1.6% in May—the lowest level in nearly three years.

The Bank of Korea expects inflation to average 1.2% this year. For 2017, the Bank sees inflation averaging 2.0%. FocusEconomics Consensus Forecast panelists expect inflation to average 1.4% in 2016, which is unchanged from last month’s forecast. In 2017, the panel expects average inflation to reach 1.9%.

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Korea Inflation Chart

Korea Inflation May 2016

Note: Month-on-month and year-on-year changes of consumer price index in %.
Source: National Statistics Office of Korea (KOSTAT)

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