Korea Inflation (Core, ann. var. %, aop)

Inflation falls to lowest level since April 2022 in February

Inflation came in at 4.8% in February, which was down from January’s 5.2% and below market expectations of 5.0%. February’s reading represented the weakest inflation rate since April 2022. The slowdown was largely due to a more moderate increase in prices for housing and utilities. In addition, price pressures for transportation moderated.

Annual average inflation edged up to 5.3% in February (January: 5.2%). Meanwhile, core inflation edged down to 4.0% in February from January’s 4.1%.

Finally, consumer prices rose 0.25% over the previous month in February, after January’s 0.75% rise.

The lower-than-expected inflation figure in February came as fuel price inflation became negative for the first time since February 2021 and the price of industrial products, such as processed food and durable goods, declined. Retailers’ inventory levels rose due to weak consumer demand, pushing firms to offer discounts in order to sell products.

Fuel price pressures and consumer demand are expected to remain mild ahead, leading our panelists to expect inflation to fall close to the Bank of Korea’s 2.0% target by the end of the year.