South Korea's inflation eases to 10-month low, lower than expected

[SEOUL] South Korea's inflation eased to the slowest pace in 10 months, data on Tuesday showed, curbed by soft domestic demand and low energy-import costs.

The consumer price index rose 0.7 per cent in July from a year earlier, Statistics Korea said in a statement.

That was below the median estimate of 0.8 per cent in a Reuters poll and slower than a 0.8 per cent rise in June. July inflation rose at the slowest pace since Sept. 2015, records showed.

The index rose 0.1 per cent from the previous month, versus the survey's projection for a 0.2 per cent gain.

Core CPI, which excludes oil and agricultural products, rose 1.6 per cent from a year ago, which matched the reading for May.

Service costs, however, posted a 1.9 per cent gain in the same period, marking the slowest increase since June 2015.

Moderate inflation, even with the impact of higher oil costs, supports the case that the Bank of Korea may cut rates in coming months.

The benchmark inflation index remains well below the central bank's 2 per cent target, even after its decision to lower rates to a record 1.25 per cent in June, shows that consumer spending isn't active enough to support growth.

Among other key economic indicators released before the Bank of Korea's meeting to review policy rate on Aug 11, exports extended a slump through July while industrial production missed expectations in June from a month ago.

REUTERS