Korea: Inflation hits a fourteen-month high in January
February 4, 2020
Consumer prices increased 0.6% over the prior month in January, stronger than December’s 0.2% increase. Higher prices for food and non-alcoholic beverages, and transportation were chiefly behind January’s rise.
Inflation increased to 1.5% in January from 0.7% in December, but remained below the Bank of Korea’s 2.0% target rate. Core inflation—which excludes fresh food and energy prices—edged up to 0.8% in January from 0.6% in December. Annual average inflation was stable at 0.4% in January from the month prior.
Going forward, inflationary pressures should perk up this year as lower interest rates—particularly ultra-low mortgage rates—support household spending and credit demand. Meanwhile, strong government spending should also support wage growth and job creation, further fueling inflation. That being said, relatively tepid economic growth, elevated household debt and a subdued housing market will likely keep inflationary pressures comfortably below the Bank of Korea’s 2.0% target rate.
Author: Steven Burke, Economist