Korea: Inflation decelerates in October
November 1, 2017
Consumer prices fell 0.2% in October compared to the previous month. The result, which contrasted the 0.1% increase recorded in September, was primarily driven by lower prices for food and non-alcoholic beverages. This was partly offset by higher prices for transport, and furnishings, household equipment and routine maintenance. Market analysts had expected a more moderate 0.1% fall in October.
Inflation decelerated from 2.1% in September to 1.8% in October, which was the lowest reading since December 2016. The reading was below the Bank of Korea’s 2.0% inflation target and came in below market expectations of 1.9%.
Core inflation, which excludes fresh food and energy prices, came in at 1.3% in October, down from the 1.6% reading in September. Annual average inflation ticked up from 1.9% in September to 2.0% in October, the highest rate since January 2013.
With higher-than-expected economic growth in Q3, inflation rates close to the Bank of Korea’s 2.0% target in recent months, and the government of Korea’s measures to reduce household debt levels now announced, most of our Consensus Forecast panelists expect the Bank of Korea to hike its base rate by mid-2018, if not before.
Author: Edward Gardner, Economist