South Korea’s inflation cools to slowest pace since 2021
SOUTH Korea’s inflation slowed more than expected, decelerating to the slowest pace since early 2021 and providing more scope for the central bank to accelerate its policy easing campaign next year should economic momentum sputter.
Consumer prices advanced 1.3 per cent in October from a year earlier, moderating from a 1.6 per cent clip in September and easing for a third straight month, the statistics office reported on Tuesday (Nov 5). Economists surveyed by Bloomberg had forecast the pace of price growth would be 1.4 per cent.
Prices excluding energy and foods rose 1.8 per cent, slowing from a 2 per cent pace in September, the report showed.
The latest data come about a month after the Bank of Korea (BOK) conducted a policy pivot by cutting the benchmark interest rate by 25 basis points to 3.25 per cent. That decision was supported by moderating inflation, which slipped below the central bank’s 2 per cent target, and cooling Seoul property prices.
The BOK nonetheless looks to hold its rate unchanged when it meets on Nov 28, most economists say, as policymakers seek to assess the impact of the October rate cut as they stay wary for any signs the housing market might heat up again.
A cooling export rally has added uncertainties to South Korea’s economic outlook in recent weeks, which comes on top of weak private spending and lingering credit risks in the construction industry. Risks stemming from the US election this week and the Middle East conflict also are weighing on economic sentiment.
Those factors have bolstered the case for the central bank to accelerate its easing cycle next year.
How global central banks such as the US Federal Reserve proceed along their own paths towards policy easing in the coming months will influence the BOK’s rate trajectory.
Consumer prices rose sharply after governments around the world provided economic stimulus to shore up their economies during the coronavirus pandemic. Having ratcheted rates higher to tame inflation that resulted from the stimulus, many central banks shifted to easing cycles this year after price growth slowed.
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