Korea Inflation March 2017

Korea

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.

The Bank of Korea expects inflation to average 1.8% in 2017 and 1.9% in 2018. FocusEconomics Consensus Forecast panelists expect inflation to remain buoyed during the first three quarters of the year on the back of higher food and energy prices as well as a favorable base effect before easing in the last quarter of the year. They expect it to average 1.7% in 2017, which is up 0.1 percentage points from last month’s forecast. In 2018, the panel expects inflation to average 1.8%.


Author:, Economist

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Korea Inflation March 2017

Note: Month-on-month and year-on-year changes of consumer price index in %.
Source: National Statistics Office of Korea (KOSTAT)


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