Korea: Inflation falls to lowest level in over a decade
October 1, 2013
In September, consumer prices rose 0.2% over the previous month, which was down from the 0.3% increase observed in August and slightly under market expectations of a 0.3% increase. The reading reflects that lower prices for food and non-alcoholic beverages as well as for transport offset higher prices for clothing and footwear.
Annual inflation fell from 1.3% in August to 0.8% in September, undershooting market expectations of 1.2%. The annual reading represents the lowest level in 14 years and sits well below the Central Bank's target range of 3.0% plus/minus 0.5 percentage points, providing the Bank of Korea with ample scope to cut interest rates going forward.
The core inflation index, which excludes more volatile items such as fresh food and energy, added 0.4% over the previous month (August: 0.0% month-on-month). Meanwhile, annual core inflation rose from 1.3% in August to 1.6% in September.
The Central Bank sees annual average inflation at 1.7% this year. For 2014, the Bank expects inflation to average 2.9%. FocusEconomics Consensus Forecast panelists expect inflation to average 1.6% in 2013, which is unchanged from last month's forecast. According to the panel, average inflation should reach 3.0% in 2014.
Author: Ricardo Aceves, Senior Economist