S.Korea August inflation stays at 9-year peak, beats forecast By Reuters

By Joori Roh

SEOUL (Reuters) – South Korea’s August consumer inflation stayed at a nine-year peak fuelled by a continued spike in prices of fresh food due to a heat wave and the rising cost of oil products, housing rental and other services.

The consumer price index (CPI) last month rose 2.6% from a year earlier, Statistics Korea said, unchanged from July and beating the 2.3% increase tipped in a Reuters survey.

The 2.6% rise was first seen in May, when inflation marked the fastest pace since April 2012, and continued to stay above the central bank’s 2% target for a fifth straight month.

Thursday’s data comes a week after the Bank of Korea raised its policy rate for the first time in almost three years, becoming the first major Asian central bank to shift away from pandemic-era monetary settings as ballooning consumer debt created new threats for the economy.

Breakdown of data showed continued price surge for agricultural and oil products towed the inflation, with housing rental costs and dining and other services costs further adding to the boost.

The cost of agricultural, livestock and fisheries and petroleum products jumped 7.8% and 21.6%, respectively, while that of housing rentals and dining rose 1.6% and 2.8% each.

Month-on-month CPI rose 0.6%, the best reading since January and accelerating from 0.2% in July. Economists had forecast a 0.3% increase.

Meanwhile, core CPI rose 1.3% year-on-year, marking the fastest growth since June 2018 and up from a 1.2% rise in July.

The BOK pushed up its inflation projection for 2021 to 2.1% from 1.8% previously, and sees it standing at 1.5% for the whole of 2022.

In the Reuters poll published last week, all 18 analysts who gave end-2022 forecasts saw further rate hikes next year, with a slim majority of 10 predicting the base rate at 1.25% by end of next year.