Korea Inflation


Inflation soars in August to a two-year high

In August, consumer prices added 0.91% over the previous month, which was above the 0.66% rise recorded in July and exceeded the 0.35% increase observed in August 2010. Prices for food and non-alcoholic beverages, which added 2.99% compared to the previous month, were the main drivers behind the reading. As a consequence of the monthly price spike, annual inflation jumped from 4.7% in July to 5.3% in August, exceeding market analysts' expectations of inflation rising to 4.8% and reaching the highest level since August 2008. With August's result, annual inflation remained above the Central Bank's target of 3.0% 1.0 percentage points for the eighth consecutive month. The core inflation index, which excludes more volatile items such as fresh food and energy, added 0.34% over the previous month, which was in line with the result observed in July but above the 0.17% rise recorded in August 2010. Consequently, annual core inflation picked up from 3.8% in July to 4.0% in August. The Central Bank expects inflation to end the year at 4.0% in 2011, before stepping down to 3.4% by the end of 2012.

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