Seoul, March 6 (BNA): South Korea’s consumer inflation rate for February reached its slowest pace in 10 months, reinforcing views that the central bank has finished its current policy tightening cycle after keeping interest rates steady last month.
Asia’s fourth-largest economy teeters near the brink of recession, and policymakers will be wary of slowing global growth and external demand for its key exports such as chips and consumer electronics, Reuters reports.
Statistics Korea’s data on Monday showed the consumer price index rose 4.8% in February from a year earlier, down from 5.2% in January. It was down from 5.1% in a Reuters poll, and was also the lowest rate since April 2022.
“It was encouraging that the pace of escalation in private services prices had slowed, which made it less likely that the central bank would raise additional interest rates, at least on the domestic side,” said Ahn Jae-kyun, fixed-income analyst at Shinhan Securities.
The annual core inflation rate, which excludes volatile food and energy prices, fell to 4.0% from 4.1% in the previous month, the lowest level since August, indicating an easing of underlying price pressure.
The Bank of Korea said in a statement after the release of the consumer price index that the February data came in as expected and that the inflation rate will drop significantly in March and continue to decline this year, but remains firmly above its medium-term target of 2%.
The Bank of Korea kept interest rates steady last month, after a year of steady increases, and said the monetary tightening campaign would not resume if inflation follows the expected path toward moderation.
Data released last week showed South Korea may be heading for a recession, with exports and domestic retail sales continuing to weaken, after a 0.4% contraction in the latest quarter.
By product category, the prices of animal products decreased by 3.2% from the previous month, and the prices of petroleum products decreased by 1.3%, which led to a decrease in the inflation rate.
The inflation index rose 0.3% on a monthly basis, compared to 0.8% in the previous month and the 0.5% expected by economists.
Finance Minister Cho Kyung Ho said separately that slowing inflation will become more evident in the coming months, unless there is an external shock.
South Korean three-year Treasury futures rose 0.24 points to 103.49 during the morning session, helped by lower US Treasury yields over the weekend.