Zhitong Finance and Economics learned that data released by Statistics Korea on Friday showed that the consumer ** index (CPI) in January was **2 year-on-year8%, down from 32%。Economists surveyed said growth would slow to 29%。
South Korea's inflation slowed more than expected, falling to the range sought by policymakers, but they remain concerned that the global conflict could spur energy costs, leading to a possible resurgence of prices.
Excluding food and energy, the increase was also modest, compared to the same period last year5%, compared to a 2. increase in December8%。That's down 0 from what economists expected1 percentage point is fast.
Cho Yong-gu, strategist at Xinrong, said: "The real positive news is the cooling of the core, which has been bothering policymakers. "Headline inflation still needs to be below 25% would prompt the Bank of Korea to reconsider its policy, which is unlikely to happen in the next three to four months. ”
In statements following the release of the data, both the Bank of Korea and the Ministry of Finance said that inflation is still likely to rise in the coming months, citing uncertainties such as the conflict in the Middle East and its impact on oil prices.
The Bank of Korea remains focused on keeping inflation within its 2% target range and keeping it at that level comfortably. Bank of Korea Governor Rhee Chang-yong said on Thursday that any possible rate cut would require a close eye on price data.
Data released by Statistics Korea showed that transportation costs fell by 0 percent last month from a year earlier3%, which is a key drag on inflation. Utility Charges**1At 8%, it was the slowest increase of all the categories tracked by the agency. Food and non-alcoholic beverages**still**59%, clothing and shoes ***58%。
The Bank of Korea (BOK) held its policy rate at 3 last month amid concerns about lingering price pressures5% unchanged, and all board members said there may not be a need to raise rates for at least the next three months. This actually makes 35% becomes the peak of the policy rate.
At the same time, Rhee himself said that it will also be difficult to cut interest rates in the next six months, which refutes market speculation that the Bank of Korea may join central banks such as the Federal Reserve and the European Central Bank, hinting at a shift to easing.
Fed Chair Jerome Powell this week tried to cool speculation of a near-term U.S. rate cut, insisting that the Fed had not declared victory in the fight against inflation and downplaying the possibility of a rate cut in March. This prompted economists at Goldman Sachs Group Inc. to postpone expectations for the first U.S. rate cut from March to May.
The potential resurgence of household debt was a major concern that kept Rhey from considering an early policy pivot. The Bank of Korea (BOK) began its tightening cycle earlier than its counterparts in most developed countries in 2021, citing financial imbalances and other reasons that led to tightening. With the exception of certain middle-class neighborhoods following a series of interest rate hikes, the housing market remains largely in the doldrums.
This has led to a debt crisis for some developers, including Tairong Construction, and has sparked widespread concerns about financial stability, putting pressure on policy to the contrary. This concern is one of the reasons why some Bank of Korea members considered another rate hike if necessary to retract their previous commitments at their most recent meeting.
Tight monetary policy also helps the local currency appreciate, thereby curbing imported inflation. South Korea is heavily dependent on imports for energy and food. South Korea's imports fell by 7 percent last month8%, with the largest declines in imports of natural gas and coal.
The Bank of Korea expects inflation to slow to its 2% target by the end of the year and wants to see inflation stabilize within this range before considering any easing. In order to curb prices, public fees were frozen in the first half of the year, while restrictions on price increases by companies were strengthened.
Economist Hyosang Kwon said, "The last-mile disinflationary process is likely to be more uncertain and bumpy than it has been so far." For this reason, we believe the Bank of Korea would like to see more evidence and is confident that it will achieve its 2% target. ”
Alleviating consumers' inflation pain has been a key goal for Yoon Suk-yeol, whose party is preparing for a parliamentary vote in April, which will be crucial to implementing his policy agenda during his term ending in 2027.
South Korea's finance minister, Choi Sang-Mok, said he would "go all out" to steer inflation to the 2% range as soon as possible and firmly. He highlighted measures to control agricultural products ahead of family gatherings during the Lunar New Year holiday, which starts next week.