Korea: Inflation eases in February
March 3, 2020
Consumer prices were flat over the prior month in February, following January’s 0.6% increase. Higher prices for housing and utilities were offset by lower prices for food and non-alcoholic beverages in February.
Inflation ticked down to 1.1% in February from 1.5% in January, remaining below the Bank of Korea’s 2.0% target rate. Core inflation—which excludes fresh food and energy prices—edged down to 0.5% in February from 0.8% in January. Annual average inflation, however, ticked up to 0.5% in February from 0.4% the month prior.
Looking ahead, inflationary pressures should perk up this year as lower interest rates—particularly ultra-low mortgage rates—support household spending and credit demand. Meanwhile, strong government spending should also support wage growth and job creation, further fueling inflation. That being said, relatively tepid economic growth, elevated household debt and a subdued housing market will likely keep inflationary pressures comfortably below the Bank of Korea’s 2.0% target rate.
Author: Steven Burke, Economist