Korea: Inflation falls to eight-month low in May
June 2, 2016
In May, consumer prices rose 0.1% over the previous month, which mirrored an increase in April. The National Statistics Office of Korea (KOSTAT) reported that higher prices for food and non-alcoholic beverages, transportation, as well as recreation and culture were the main drivers behind the monthly increase.
Despite the monthly increase, inflation fell from 1.0% in April to 0.8% in May, which, according to KOSTAT, represented the lowest inflation rate since September 2015. The 12-month average of the annual variation in inflation was 0.9% in May (April: 0.9%). 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. As a result, 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, rose 0.2% May compared to the previous month, which came in above April’s 0.1% increase. Core inflation fell from 1.8% in April to 1.6% in May—the lowest level in nearly three years.
Author: Ricardo Aceves, Senior Economist