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Korea Inflation November 2022

Korea: Inflation declines to lowest level since April in November

Inflation eased to 5.0% in November from Octobers 5.7%. November’s reading represented the lowest inflation rate since April. The result was primarily due to more moderate increases in prices for food, transport, and housing and utilities.

Annual average inflation ticked up to 5.0% in November (October: 4.9%). Meanwhile, core inflation rose to 4.3% in November, from Octobers 4.2%.

Lastly, consumer prices fell 0.10% from the previous month in November, contrasting October’s 0.26% increase. November’s result marked the weakest reading since August.

The downtick in inflation seen in November was in part due to a base effect: Compared with pre-pandemic levels, the consumer price index was up 9.7% in November, compared to 9.2% in October. That said, inflation did decline month on month, largely due to weaker price pressures for food, transport, and housing and utilities. This will have been due in large part to a decline in the prices of agricultural and petroleum products on global markets.

Inflation should continue to trend downward in the coming months on a tougher base effect, softening domestic demand and cooling commodity prices.

Analysts at Nomura commented on the outlook:

“Core CPI inflation edged up [in November], owing to base effects, but slowed sequentially, suggesting y-o-y core CPI inflation should [have] peak[ed] in November. With easing supply-side factors, we expect slowing domestic demand to ease service price inflation, supporting our view that inflation is likely to moderate faster than expected, back to the BOKs 2% target in H2 2023.”

Meanwhile, INGs Min Joo Kang commented on the implications for monetary policy:

“Today’s lower-than-expected inflation is unlikely to change the BoK’s policy stance. Governor Rhee Chang-yong had already mentioned last month that base effects leading to a temporary slowdown in CPI inflation would not change the BoK’s inflation outlook.”

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