Korea: Inflation edges down in April
May 2, 2017
Consumer prices decreased 0.1% in April compared to the previous month, which followed muted growth in March and marked the lowest reading in five months. The result was mainly driven by lower prices for food and non-alcoholic beverages, clothing and footwear and transport, which outstripped increases in prices for communication, recreation and culture and restaurants.
Reflecting the loss of momentum in monthly consumer price changes, inflation edged down from March’s 2.2%—an over four-year high—to 1.9% in April. The result, which came in below market expectations of a milder deceleration to 2.1%, underscored some degree of slack in the Korean economy and removed some of the Central Bank’s ability to follow the U.S. Federal Reserve in hiking its main policy rates. In March, inflation had been above the Central Bank’s inflation target for the first time since the target was revised last year to 2.0%. Inflation is now unlikely to overshoot the target again until cost-push inflation—linked to higher commodity prices—and higher rent prices fuel price pressures.
Annual average inflation hit 1.4% in April, up from March’s 1.3% and the highest figure in over two years. However, core inflation, which excludes fresh food and energy prices, dipped down to 1.3% in April from 1.4% in March. Annual average core inflation was stable at March’s 1.5% in April.
Author: David Ampudia, Economist