Summary
- Consumer prices increased by 0.5% on a monthly basis, the most significant hike since September, as per Statistics Korea.
- Agricultural products witnessed a 5.7% price surge, contributing to the index growth, while petroleum products reported a 2.5% increase.
- Policymakers project inflation fluctuations in February and March, yet anticipate its stabilization post that period.
- Unless a sharp increase in oil prices occurs, inflation will likely slow down due to weak demand-side pressure.
- The government is determined to reduce inflation below 3% by implementing measures to stabilize agricultural product prices and by monitoring oil prices vigilantly.
- In February, the Core CPI, excluding unstable food and energy items, was 2.5% higher than the previous year.
Monthly Analysis of Consumer Prices
Consumer prices saw an increase of 0.5% on a monthly basis, registering the most pronounced leap since last September, as stated by Statistics Korea. In the prior month, it was a 0.4% increase.
Prices Variation by Product
Analysing by product, agriculture commodities experienced a significant escalation of 5.7% over the month, propelling the index higher. The prices of petroleum products also saw a climb, rising by 2.5%.
Projection and Approach Towards Inflation
Policymakers foresee inflation possessing a volatile nature during February and March but envisage it will start to stabilize thereafter. The inflation is anticipated to decelerate unless there is an abrupt surge in oil prices as a result of subdued demand-side pressure. However, it may not be a smooth transition with living costs, especially agricultural products, likely to maintain high levels for an extended period,” the Bank of Korea (BOK) commented post data release.
The Government’s Stance on Inflation
Choi Sang-mok, the Finance Minister, stated that the government intends to reduce inflation to under 3%. This aim will be achieved by adopting strategies to create stability in the prices of agricultural products and by performing close surveillance over oil prices.
Keeping Interest Rates Steady
The BOK maintained a steady interest rate for nine consecutive meetings last month. It aimed to quell investors’ aggressive expectations for a rate cut as inflation still considerably exceeds the central bank’s target of 2%.
The Picture for Core CPI
The Core CPI, which excludes volatile food and energy commodities, reported a 2.5% increase in February compared to the previous year—a rate identical to January’s.
