Korea Inflation March 2022


Korea: Inflation hits more-than-decade high in March

April 5, 2022

Consumer prices increased 0.72% in March over the previous month, accelerating from the 0.58% rise seen in February. March's figure was the highest reading since September 2018. Looking at the details of the release, higher oil prices were largely behind the higher reading, with transport prices accelerating in March. Prices for housing and utilities increased at a softer rate, largely due to government measures to protect households from the effect of higher energy prices on the cost of living.

Inflation came in at 4.1% in March, which was up from February’s 3.7%. March's result represented the highest inflation rate since December 2011. Annual average inflation edged up to 3.1% in March (February: 2.9%). Finally, core inflation ticked up to 3.3% in March, from the previous month's 3.2%.

Analysts at Nomura see inflation as persistent this year:

“Following the release of March inflation data, we expect headline inflation to remain elevated and above the BOK’s 2.0% target throughout 2022, as some areas of inflation are likely to prove more persistent due to the second-round effects of cost-push inflation. As a result, we raise our inflation forecasts to 3.6% year-on-year for 2022 (BOK: 3.1%), substantially up from our previous estimate of 2.9%, and to 1.7% for 2023 (1.3% previously), reflecting a more persistent rise in primary drivers such as oil and dining out prices.”

Analysts at ING note new government measures to shield households from the rising cost of living:

“With growing concerns over higher inflation, the government has decided to expand its temporary fuel tax cut to 30.0% (vs 20.0% currently). This will apply from May to July. It has halted additional electricity rate hikes for the second quarter of 2022. The government’s measures could relieve some pressures at best, but CPI is expected to hover around 4% in the second quarter of this year. As underlying pipeline pressures increases, we expect it soon to be passed on to domestic prices—not only in commodity prices but also in services prices.”

Our panel forecasts inflation to average 3.0% in 2022, which is up 0.6 percentage points from last month’s forecast. In 2023, inflation is seen averaging 1.8%.


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Korea Inflation Chart

Korea Inflation March 2022

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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