S.Korea inflation slows to 3-1/2-year low, backs case for imminent rate cut

SEOUL (Reuters) -South Korea’s consumer inflation slowed in August to the weakest in nearly 3-1/2 years, official data showed on Tuesday, supporting market expectations for an easing of monetary policy as early as next month.

The consumer price index rose 2.0% from a year earlier, after gaining 2.6% the previous month, marking the slowest annual rise since March 2021.

It matched the median 2.0% increase tipped in a Reuters survey of economists and the central bank’s medium-term inflation target of 2%.

“Going forward, unless there is any additional shock from weather conditions or global oil prices, consumer inflation is expected to stabilise in the lower 2% range,” said Vice Finance Minister Kim Beom-seok.

Last month, the Bank of Korea held interest rates steady at their highest in nearly 16 years but revived expectations for a policy easing that some economists see happening as soon as October as growth concerns overshadow inflation worries.

The central bank said Tuesday’s data showed inflation was stabilising more quickly than in other major economies, and expects prices to maintain a stable trend.

On a monthly basis, the index was up 0.4%, the fastest in six months, after rising 0.3% in the prior month and beating forecast by economists for 0.3%.

Core CPI, excluding volatile food and energy items, rose 2.1% from a year earlier, slowing from the previous month’s 2.2% rise and marking the weakest since November 2021.