Korea Inflation April 2017

Korea

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.

The Bank of Korea expects inflation to average 1.9% in both 2017 and 2018. FocusEconomics Consensus Forecast panelists expect inflation to remain buoyed during the first three quarters of the year on the back of higher food and energy prices as well as a favorable base effect before easing in the last quarter of the year. They expect it to average 1.7% in 2017, which is up 0.1 percentage points from last month’s forecast. In 2018, the panel expects inflation to average 1.8%.


Author:, Economist

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Korea Inflation April 2017

Note: Month-on-month and year-on-year changes of consumer price index in %.
Source: National Statistics Office of Korea (KOSTAT)


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