Korea Inflation


Inflation rises to highest level in over two years

In March, consumer prices rose 0.50% over the previous month, which was down from the 0.76% price increase recorded in February but up from the 0.35% increase observed in March 2010. The rise was primarily driven by higher prices for transport, which added 2.08% over the previous month. As a result of the monthly price increase, annual inflation rose from 4.5% in February to 4.7% in March, which was only a tad below the 4.8% anticipated by market analysts and represented the highest level since October 2008. At the current level, inflation is above the Central Bank's target of 3.0% and surpasses the tolerance range of 1.0 percentage points for a third consecutive month. Moreover, core inflation is also on the rise. The core inflation index, which excludes more volatile items such as fresh food and energy, added 0.26% over the previous month, pushing annual core inflation from 3.1% in February to 3.3% in March. The Central Bank expects inflation to end the year at 3.9% in 2011, before stepping down to 3.4% by the end of 2012.

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