South Korea’s prices soar to near quarter-century high

Inflation hits 6.3 percent in July, the highest rate since November 1998.

People shopping in a South Korean convenience store.
South Korea’s prices rose more than 6 percent in July, the fastest jump in nearly a quarter century [File: Heo Ran/Reuters]

South Korea’s prices rose more than 6 percent in July compared with last year, the fastest jump in nearly a quarter century.

The East Asian economy’s consumer price index rose 6.3 percent last month, Statistics Korea data showed on Tuesday, up from 6 percent in June.

On a monthly basis, the index rose 0.5 percent last month, down slightly from a 0.6 percent gain in June.

The gain, which was in line with market expectations, marks the highest rate of inflation since prices rose 6.8 percent in November 1998.

The heady inflation data comes as the Bank of Korea (BOK) mulls further interest rate hikes at its next policy meeting on August 25.

The central bank is widely viewed as having more breathing space to raise rates after Asia’s fourth-largest economy grew a faster-than-expected 2.9 percent year-on-year in the second quarter.

The BOK last month unveiled an unprecedented half a percentage point hike to lift the benchmark interest rate to 2.25 percent.

Central bank policymakers, who began raising interest rates before most of its peers, described the July hike as unusual, signalling that more modest increases were likely in future.

“Forward-looking data signals a rapid deterioration in consumption and service sector activity, so the BOK is likely be more cautious in the future,” Min Joo Kang, senior economist for South Korea and Japan at ING, said in a note.

“Based on today’s data, we expect the BOK to raise rates by 25bp at its August meeting and we maintain our full-year 2022 inflation forecast of 5.3 percent year on year.”

Source: News Agencies