S.Korea inflation touches fresh 16-year low

[SEOUL] South Korea's annual inflation slowed for a second month in March and touched a fresh 16-year low, data on Wednesday showed, as a global oil slide keeps price pressures low.

The consumer price index gained 0.4 per cent in March from a year earlier, Statistics Korea data showed, just below a 0.5 per cent rise in February. March inflation rose at the slowest clip since July 1999, records showed.

The result was in line with a median forecast of 0.4 per cent in a Reuters poll. "Price pressures will remain weak until the autumn in the zero-percent range and are expected to push the central bank to cut interest rates again," said Suh Dae-il, an economist at Daewoo Securities. Suh said, however, inflation would not fall into the negative range.

Inflation has stayed in the zero-percent range since December last year, giving the Bank of Korea room to cut interest rates last month in a pre-emptive move to fight off weakness in the recovery.

Analysts are now divided over whether the central bank will cut again or hold interest rates steady for the rest of the year.

Policymakers have emphasised that current low inflation has been due to a fall in commodity prices. Oil products in the inflation index dropped 21.4 per cent from a year ago in March, Wednesday's data showed.

Annual core inflation, which strips out volatile agricultural and oil products' prices, rose 2.1 per cent in March from a year ago to mark a three-month low, compared to a 2.3 per cent gain in February.

Month-on-month, the index in March marked no change from February, compared with the a forecast for a 0.1 percent rise in the Reuters poll.

REUTERS