South Korean consumer inflation slows for second month in September

South Korea’s consumer inflation slowed for a second month in September, according to data on Wednesday, but economists said the data would not change the central bank’s tightening bias amid growing rumors it may opt for a higher rise next week.

The consumer price index (CPI) rose 5.6% in September from the same month a year earlier, according to data from the Korea Bureau of Statistics, slowing for the second month in a row. In August, inflation fell to 5.7%, marking the first slowdown in seven months.

The US Federal Reserve’s aggressive tightening stance has raised economists’ expectations that the Bank of Korea could raise the official interest rate by 50 basis points next week for the second time in its history.

Economists said the latest data suggested inflation was at or above its peak, but they expected the central bank to stick to its stance given a weakening won and aggressive monetary policy in the United States.

“I think that the general inflationary pressures have already passed their peak in South Korea, but the Bank of Korea does not make its political decisions based solely on the inflation figures, but must take into account the American policy and the type of change,” said Moon Hong-cheol, an economist at DB Financial Investment.

September’s CPI annual growth rate was the slowest in four months and slightly below economists’ median forecast of 5.7%, although predictions varied widely.

South Korea and the United States agree to apply liquidity measures if necessary

South Korea’s central bank has raised its official interest rate by a total of 2 percentage points since August last year, from a record low of 0.5%, to fight inflation, and Governor Rhee Chang-yong has said that the hardening stance will continue for the time being.

The aggressive tightening stance of the US Federal Reserve has increased economists’ expectations that the Bank of Korea could raise the official interest rate

The Bank of Korea reaffirmed at an internal meeting on Wednesday its earlier view that the inflation outlook was uncertain, listing the won and global oil prices as the main possible drivers of future inflation.

The won’s sharp decline has raised concerns about potential capital flight and rising import prices. The currency has weakened 16% against the dollar so far this year.

Article republished by the Chinese state media CGTN within the framework of an agreement between both parties to share content. Link to original article:https://news.cgtn.com/news/2022-10-05/South-Korea-s-September-inflation-slows-for-a-second-month-1dSATneO0s8/index.html