Korea: Inflation rises slightly, but remains subdued
December 2, 2013
Consumer prices fell 0.09% over the previous month in November, which follows the 0.28% decrease observed in October. The result marks the second consecutive decline in consumer prices and mainly reflects a drop in prices for food and non-alcoholic beverages, cultural activities, and transport and recreation.
Annual inflation inched up from October's 14-year low of 0.7% to 0.9% in November, which undershot market expectations of 1.0%. The annual reading remains 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.
Core consumer prices, which exclude more volatile items such as fresh food and energy, added 0.28% over the previous month (October: 0.0%). Annual core inflation increased from 1.6% in October to 1.8% in November.
The Central Bank sees annual average inflation at 1.2% this year. For 2014, the Bank expects inflation to average 2.5%. FocusEconomics Consensus Forecast panelists expect inflation to average 1.4% in 2013, which is down 0.1 percentage points from last month's forecast. According to the panel, average inflation should reach 2.4% in 2014, which is also down 0.1 percentage points over the previous month's Consensus.
Author: Ricardo Aceves, Senior Economist