Korea Inflation


Inflation rises to highest level in more than two years

In February, consumer prices rose 0.76% over the previous month, which was down from the 0.93% price increase recorded in January but more than double the 0.35% increase recorded in February 2010. Higher prices for food and alcoholic beverages (+1.83% month-on-month) and housing (+0.69% mom) were the main drivers behind the monthly increase. As a result of the pronounced price increase, annual inflation jumped from 4.1% in January to 4.5%, coming in above the 4.3% anticipated by market analysts and reaching the highest level since November 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 second 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 0.69% over January, pushing annual core inflation from 2.6% in January to 3.1% in February. The Central Bank expects inflation to end the year at 3.5% in 2011, before stepping down to 3.2% by the end of 2012.

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