Korea Inflation August 2016


Korea: Inflation falls to 16-month low in August

September 1, 2016

In August, consumer prices fell 0.1% over the previous month, which offset the 0.1% increase in the previous month and contrasted the 0.2% increase the markets had expected. The National Statistics Office of Korea (KOSTAT) reported that lower prices for housing, utilities, healthcare and transport were the main drivers behind the monthly drop.

Inflation fell from 0.7% in July to 0.4% in August, which marks the lowest inflation rate since April 2015. Average inflation in August held at 0.9% for the fifth consecutive month. Inflation continues to hover well below the Central Bank’s target range of 2.5%–3.5%. Persistent weak inflationary pressures have caused the Bank of Korea to miss its inflation target consistently in the past three years, so in December 2015 the Central Bank set a lower target band of 2.5%–3.5% for the period between 2016 and 2018.

Core consumer prices, which exclude fresh food and energy prices, decreased 0.3% over the previous month in August, which contrasted the 0.1% increase in July. Core inflation fell sharply from 1.6% in July to 1.1% in August.

The Bank of Korea expects inflation to average 1.1% in 2016. For 2017, the Bank sees inflation averaging 1.9%. FocusEconomics Consensus Forecast panelists expect inflation to average 1.1% in 2016, which is unchanged from last month’s forecast. In 2017, the panel expects inflation to average 1.6%.

Author:, Senior Economist

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Korea Inflation Chart

Korea Inflation August 2016

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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