South Korea’s inflation showing slowdown confirming that there is no need to raise rates
2023.03.06 04:31
South Korea’s inflation showing slowdown confirming that there is no need to raise rates
By Kristina Sobol
Budrigannews.com – Consumer prices in South Korea increased in February at their slowest rate in ten months, bolstering expectations that the central bank has completed its current cycle of policy tightening after maintaining rates last month.
Monday’s Statistics Korea data showed that the consumer price index increased by 4.8% in February, down from 5.2% in January. It was also the lowest rate since April 2022, falling below the 5.1% predicted in a Reuters poll.
Prices for petroleum products and livestock products both decreased by 1.3% and 3.2%, respectively, bringing the overall inflation rate down.
Compared to the previous month’s 0.8% increase and the 0.5% expected by economists, the monthly inflation index increased by 0.3 percent.
Ahn Jae-kyun, a fixed-income analyst at Shinhan Securities, stated, “It was encouraging that the rising pace of private service prices slowed, lowering the possibility of additional rate hikes by the central bank, at least on the domestic side.”
The annual core inflation rate, which excludes volatile energy and food prices, fell to 4.0% from 4.1% a month earlier, marking the lowest level since August, indicating that underlying price pressure is decreasing.
Following the CPI release, the Bank of Korea released a statement stating that the February data came in as expected and that high base effects would cause the inflation rate to fall significantly in March.
After a year of consecutive rate increases, the BOK held interest rates steady last month and stated that the monetary tightening campaign would not resume unless inflation followed the anticipated path toward moderation.
Separately, Finance Minister Choo Kyung-ho stated that the inflation slowdown would become more apparent in the future unless an external shock occurred.
During the morning session, a drop in U.S. Treasury yields helped the South Korean three-year treasury bond futures rise as much as 0.24 points to 103.49.
