Korea's inflation below 2% for third straight month in November

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Korea's inflation below 2% for third straight month in November

Published: 03 Dec. 2024, 08:38 Updated: 03 Dec. 2024, 17:44

SHIN HA-NEE
[email protected]

Audio report: written by reporters, read by AI

A discount mart in Seoul is crowded with shoppers on Tuesday. Korea's consumer price index rose 1.5 percent on year in November, with prices of vegetables increasing 10.4 percent on year. [NEWS1]

Korea’s inflation edged up in November but remained below the 2 percent mark for the third consecutive month in an extended trend of price stabilization, data showed Tuesday.

The moderate increase in consumer prices, however, now faces upward pressure with persistently high foreign exchange rates driven by the strong dollar.

The consumer price index (CPI), a key measure of inflation, rose 1.5 percent in November from a year earlier, according to Statistics Korea. The yearly increase inched up from 1.3 percent in October, having dropped below the 2 percent threshold for the first time in three years when it logged 1.6 percent in September.

Low fuel prices, following a scale-back of the government's fuel tax cut announced at the end of October, kept inflation below the government’s target range. But the Bank of Korea (BOK) expects the high won-dollar exchange rate — which has been hovering around the 1,400 won per dollar mark since the U.S. presidential election — to push the figure back near the 2 percent threshold next year.

The scope of the on-year decline in fuel prices narrowed from the previous month. The prices of petroleum products fell 5.3 percent from a year earlier in November, a smaller drop compared to the 10.9 percent decrease seen in October, primarily due to a base effect from last year’s low fuel prices and the recent reduction in fuel tax cuts. On a monthly basis, petroleum prices rose 2.4 percent in November.

Core inflation, which excludes volatile food and energy prices, edged up to 1.9 percent in November from 1.8 percent in October. Vegetable prices remain a wild card, rising 10.4 percent last month. The prices of private services also increased 2.9 percent.

Consumers should expect to see the impacts of the weak won starting next month, the BOK said.

“The foreign exchange rate has been rising as of late, but the impact of the recent depreciation on consumer prices is still limited for now due to a time lag, and is expected to appear more visible after December,” BOK Deputy Gov. Kim Woong said during an inflation-monitoring meeting at the central bank on Tuesday.

Kim expects foreign exchange rates, fuel prices, the pace of domestic demand recovery and public utility price changes to affect inflation in the near term, while noting that year-end price adjustments could stimulate consumer price growth.

“Driven by the base effect and a rise in foreign exchange rates, the consumer price increase is expected to approach 2 percent for a while, while core inflation is likely to remain stable at the current level,” Kim said.

The cost of living index, which tracks price changes for 144 frequently purchased consumer goods and services, rose 1.6 percent, up from the previous month’s 1.2 percent on-year increase.

In its economic outlook issued on Nov. 28, the BOK projected Korea’s consumer price increase for this year to come at 2.3 percent and 1.9 percent next year, both 0.2 percentage points lower than its previous projection.

The central bank signaled that it may implement an additional rate cut in February 2025.

Update, Dec. 2: Added details about consumer price data and a statement from the Bank of Korea.

BY SHIN HA-NEE [[email protected]]