Korea's inflation rate falls to 5.6 percent in September

A customer shops at a discount mart in Seoul on Wednesday. Although inflation eased for the second consecutive month, it was still above 5 percent. [YONHAP]

Inflation came in at 5.6 percent in September, the second consecutive month in which the number fell after the 24-year peak of 6.3 percent was hit in July.

Easing inflation will give the central bank more room to maneuver, as it is under pressure to raise rates to contain prices and under pressure to lower them to offer relief to households and corporations.

Korea's consumer price index (CPI) was up 5.6 percent in September on year, according to Statistics Korea on Wednesday.

Korea's September figure was pulled down in part by lower oil prices and cheaper rice and eggs.

"The slowing growth in petroleum prices has affected overall consumer price growth," said Eo Woon-sun, a Statistics Korea official, on Wednesday.

The statistics agency is cautious about declaring a peaking of inflation.

"We have to closely watch the impact of the OPEC+ decision about cutting production," Eo said.

Statistics Korea is still projecting full-year inflation to come in above 5 percent. It would be the first time since 1998.

"There are factors that could further raise consumer prices," the statistics agency official said. "If the current trend continues, the annual increase will likely be above 5 percent."

Utility rate increases will help keep the inflation rate high. Electricity rates were increased 5 percent on Oct. 1, while gas rates were increased by 15 percent.

"While consumer prices are high, we are hoping they will peak around October," Finance Minister Choo Kyung-ho told lawmakers on Tuesday.

The latest consumer price report comes a week ahead of the Bank of Korea monetary policy committee meeting. It may raise rates more than 25 basis points in response to aggressive rate increases by the U.S. Federal Reserve.

The central bank expects inflation to remain at 5 or 6 percent for an extended period of time.

"While consumer price growth in September has mildly slowed down, the core inflation has increased particularly on services, including dining out," said Lee Hwan-seok, Bank of Korea deputy governor.

Market consensus is that the bank will increase the base rate by 0.5 percentage points at the Oct. 14 meeting, though it has been signaling 0.25 percentage points.

Manufactured goods prices increased 6.7 percent in September on year, less than the 7 percent increase in August.

Gasoline prices increased 5.2 percent year-on-year, down from August's 8.5 percent. Diesel prices rose 28.4 percent, less the 30.4 percent increase in August.

Agriculture, fishery and livestock product prices were up 6.2 percent year-on-year.

Vegetable prices rose 22.1 percent, napa cabbage up 95 percent and radishes 91 percent. Imported beef prices rose 12.7 percent and pork 9.1 percent.
The price of rice fell 17.8 percent on year, and eggs are down 6.3 percent.

Service prices were up 4.2 percent.

The cost of dining out rose 9 percent, the biggest jump since 1992, as franchises upped their prices to cover more expensive raw material costs.

Dining-out hamburger prices on average rose 13.5 percent year-on-year. Chicken prices were up 10.7 percent.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]