Forex▼ Bearish
South Korea Core Inflation Hits 2-1/2 Year High, BOK in Focus
Underlying price pressures build as core CPI hits fastest pace since Dec 2023, keeping the Bank of Korea on a tightening path despite softer headline inflation.
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South Korea's core inflation accelerated to its fastest pace in two and a half years in July, a signal that underlying price pressures are building even as cooling fuel costs pulled the headline number below expectations. The Bank of Korea, which resumed hiking last month for the first time in three and a half years, is likely to view this data as confirming the need for further tightening.
The consumer price index rose 2.8% in July from a year earlier, down from 3.2% in June and below the 3.0% median forecast in a Reuters poll of economists. On a monthly basis, the index fell 0.2% – its first decline in eight months – as petroleum product prices tumbled 5.5%. Economists had expected a 0.1% monthly increase.
But the softer headline masked a different story beneath the surface. Core CPI, which strips out volatile food and energy costs, climbed 2.6% year-over-year, accelerating from 2.5% in June. That is the biggest annual increase since December 2023 and points to demand-driven inflation that the central bank cannot ignore.