South Korea losing control over inflation due to growth
2023.02.02 02:47
South Korea losing control over inflation due to growth
By Kristina Sobol
Budrigannews.com – Although South Korean consumer inflation increased in January to a three-month high, investors continued to be confident that the central bank had ended its cycle of interest rate increases due primarily to temporary effects.
According to Statistics Korea data released on Thursday, the consumer price index increased by 5.2% in January compared to the same month a year earlier, moving faster than the 5.0% rate seen in December. The pace of growth had been anticipated to remain at 5%, according to economists.
The monthly rise was 0.2 percent in December, when the index was 0.8% higher.
The annual rate of price increases reached 5.7% for the first time since October.
The Finance Ministry stated in a statement that a rise in electricity costs, unfavorable weather conditions for vegetables, and a robust round of annual price increases had all contributed to inflation.
Even though inflation in January was higher than anticipated, Ahn Jae-kyun, a fixed-income analyst at Shinhan Securities, stated that it was not “totally out of the expectation path.”
According to Ahn, who, along with the majority of economists, believes that the Bank of Korea’s monetary tightening cycle came to an end last month, “January’s data is unlikely to provide grounds for additional rate hikes.”
The data was ignored by investors. Following U.S. Treasuries’ overnight movements, the 10-year treasury bond yield was down 4.3 basis points to 3.196% at 0039 GMT.
According to a breakdown of the data, the index increased as a result of increases in agricultural products and public utility costs of 4.6% and 6.2%, respectively, in January. 2.8% less petroleum products were sold.
As it was in December, when annual core inflation eased for the first time in 13 months, the core CPI, which does not include volatile prices for food and energy, was up 4.1 percent in January compared to the previous year.
In a separate statement, the Bank of Korea stated that the inflation rate increase met its expectations. It stated that the annual rate would remain approximately 5% in February.
Despite the fact that the Board of Directors of the Bank of Korea voted to increase interest rates by 25 basis points to 3.50 percent on that day, most of the members of the Board of Directors were seen becoming cautious about additional rate increases at their policy meeting on January 13. Two days ago, the meeting minutes were made public.
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