Korea: Inflation drops to 13-year low in April
May 1, 2013
In April, consumer prices dropped 0.1% over the previous month, which followed the 0.2% fall recorded in March. The contraction was mainly due to lower prices for transport as well as for furnishing and household equipment.
Building on the monthly price decrease, annual inflation inched down from 1.3% in March to 1.2% in April. The reading contrasted market expectations that had inflation rising to 1.5% and marked the lowest level since May 2000. As a result, inflation moved further below the Central Bank's target range of 3.0% plus/minus 0.5 percentage points providing the Bank of Korea with more scope to cut interest rates going forward.
The core inflation index, which excludes more volatile items such as fresh food and energy, remained unchanged over the previous month, contrasting the 0.2% drop observed in March. Annual core inflation fell from 1.5% in March to 1.4% in April.
The Central Bank sees annual average inflation at 2.3% this year. For 2014, the Bank expects inflation to average 2.8%. FocusEconomics Consensus Forecast panellists expect inflation to average 2.6% in 2013, which is unchanged from last month's forecast. According to the panel, average inflation will reach 3.0% in 2014.