Korea Inflation June 2017

Korea

Korea: Inflation softens in June

July 4, 2017

Consumer prices fell 0.1% in June compared to the previous month. The result, which contrasted the 0.1% increase recorded in May, was mainly driven by lower prices for food and non-alcoholic beverages, transport and recreation and culture services. These decreases, however, were partially offset by higher prices for furnishings, household equipment and routine maintenance as well as an increase in healthcare fees.

Inflation edged down from 2.0% in May to 1.9% in June, which is marginally below the Bank of Korea’s 2.0% inflation target. The result came in below market expectations of steady inflation at 2.0% and was largely driven by a drop in gasoline prices in June and increased imports of eggs and some fresh vegetables, which weighed on food prices.

Our panel sees inflation remaining below the Central Bank’s target as demand-side price pressure remains subdued and despite the Bank’s accommodative policy stance. The Bank is likely to stand pat in upcoming monetary policy meetings due to the government’s ongoing concerns over household debt.

Annual average inflation was steady at May’s 1.5% in June, marking the highest figure in over three years. Meanwhile, core inflation, which excludes fresh food and energy prices, was also unchanged in June at May’s 1.4%. Annual average core inflation inched down to 1.4% in June from 1.5% in May.

The Bank of Korea expects inflation to average 1.9% in both 2017 and 2018. FocusEconomics Consensus Forecast panelists expect inflation to hover around the Bank’s target before easing in the fourth quarter of the year as a result of an unfavorable base effect. They expect it to average 1.7% in 2017, which is up 0.1 percentage points from last month’s forecast. In 2018, the panel expects inflation to average 1.8%.


Author:, Economist

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Korea Inflation June 2017

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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