Korea Inflation


Inflation soars in July

In July, consumer prices added 0.66% over the previous month, which more than doubled the 0.17% rise recorded in June and was higher than the 0.35% increase observed in July 2010. Prices for food and non-alcoholic beverages, which added 2.85% compared to the previous month, were the main driver behind the reading. As a consequence of the monthly increase, annual inflation jumped from 4.4% in June to 4.7% in July, marginally exceeding market analysts' expectations of inflation rising to 4.4% and reaching the highest level since October 2008. With July's result, annual inflation remained above the Central Bank's target of 3.0% 1.0 percentage points for the seventh 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 June but above the 0.17% rise recorded in July 2010. Consequently, annual core inflation inched up from 3.7% in June to 3.8% July. 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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