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Korea Inflation March 2019

Korea: Inflation continues to sink below BoK’s target in March

Consumer prices fell 0.2% in March compared to the previous month, contrasting the 0.4% increase in February and confounding analysts’ expectations of a rise. In March, lower prices came on the back of cheaper food and non-alcoholic beverages, recreation and culture, and clothing and footwear. A rise in transport prices, linked to pricier oil and public transportation price hikes, limited the decline.

Inflation eased to 0.4% in March from 0.5% in February, falling further below the Bank of Korea’s 2.0% target, undershooting market expectations of 0.9% and hitting the lowest level in over two-and-a-half-years. Core inflation, which excludes fresh food and energy prices, dipped to 0.8% in March from 1.1% in February. Similarly, annual average inflation ticked down to 1.3% in March from 1.4% in February.

Going forward, inflationary pressures should remain somewhat muted amid ebbing housing rental prices, sluggish economic momentum and soft employment growth. That being said, the temporary fuel tax which is set to expire early May this year and a gradual rise in global oil prices should provide some upside pressure.

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