Korea: Inflation accelerates in March
April 4, 2017
Consumer prices were flat in March compared to the previous month, contrasting February’s 0.3% increase and putting an end to a three-month streak of consecutive increases in consumer prices. The result was mainly driven by lower prices for food and non-alcoholic beverages, which offset increases in prices of housing, water, electricity, gas and other fuels, and alcoholic beverages and tobacco.
Even though short-term price growth seems to be losing momentum, inflation edged up from February’s 1.9% to 2.2% in March, the highest reading since May 2012. The result, which came in above market expectations of a milder acceleration to 2.0%, represents the first time that headline inflation overshoots the Central Bank’s inflation target ever since it was revised last year to 2.0%. An inflation overshoot, coupled with the U.S. interest rate normalization, is likely to sway officials at the Bank of Korea not to cut interest rates further. Annual average inflation hit 1.3% in March, up from February’s 1.2% and the highest figure in over two years. However, core inflation, which excludes fresh food and energy prices, dipped down to 1.4% in March from 1.5% in February. Annual average core inflation was stable at February’s 1.6% increase for a second month straight.
Author: David Ampudia, Economist