South Korea inflation eases in relief to policymakers

A shopkeeper naps as she waits for customers at a traditional market in Seoul, South Korea, April 7, 2022. REUTERS/Kim Hong-Ji/File photo

SEOUL  -South Korea’s inflation eased for the first time in four months in November, bringing relief to policymakers worried about persistent inflation risks as they plan to keep their restrictive monetary policy in place for longer.

The Consumer Price Index stood 3.3 percent higher than the same month the year before, after a rise of 3.8 percent in October, official data showed on Tuesday, slower than a median 3.7 percent rise tipped in a Reuters Survey.

The index fell 0.6 percent on a monthly basis, marking its first fall since November 2022 and the sharpest drop since October 2020.

A core measure that excludes volatile components including fuel and food eased to 3 percent in November, the slowest rise since March 2022.

“Compared to core inflation in the U.S. and Europe that seem to be still in the 4 percent to 5 percent range, (South Korea’s core inflation) seems to be far more stable,” said Finance Minister Choo Kyung-ho at a policy meeting in Seoul. “Considering this, we see inflation stabilizing in a steady manner going forward, unless we face some additional external shocks.”

The mild slowdown comes mainly from an easing in prices of fresh food items as well as fuel prices.

READ: South Korea’s economic growth beats estimates, backing rate pause

The Bank of Korea kept interest rates steady at 3.5 percent last week at its final policy meeting of the year and signaled it may need to keep interest rates higher for longer to head off persistent inflation risks.

READ: Bank of Korea extends rate pause, lifts inflation forecasts

Most economists see the BOK as having reached its peak rate and expect it to start easing policy from the third quarter of next year as cooling inflation makes restrictive borrowing costs difficult to justify to the public.