• Notification Date: 31-12-2024
• Notification No: N/A

South Korea Inflation Ended Year at Fastest Pace in Four Months

Consumer inflation in South Korea accelerated in December, boosting 1.9% from a year earlier and beating market forecasts even as it continued to be slightly below the central bank's midpoint target. The gain recorded by Statistics Korea on Tuesday was the fastest yearly rise in four months since November's 1.5% gain. It still was below the Bank of Korea's medium-term inflation target of 2%.

December inflation was stronger than a Reuters poll of economists had forecast at 1.7%. The build-up in price pressures continues, but weak domestic demand remains in the way. Economists said the ongoing weakening of the South Korean won, which dropped 5.2% against the U.S. dollar in December—the steepest monthly fall in 22 months—could drive up import prices and add to inflationary pressure over time.

According to Chon Kyu-yeon, an economist at Hana Securities, the weakness in the won could be trickling down to consumer prices since domestic demand is still weak. The Bank of Korea also admitted that there might be short-term pressure on inflation since the currency is one of the biggest drivers, though it also said inflation will still be below 2% from February onwards due to continuing lack of demand pressures.

The work of growth enhancement, the central bank finally sent low-interest rates twice in succession since 2009 and promised that at least more interest rates are likely in 2025. Even while inflation rose to 2.3% during 2024 as it has continued to scale from the gain of 3.6% recorded in the year 2023, an annual rise in four years which was the smallest in four years.

The challenges put on South Korea by a relatively weak currency and high inflation put the Bank of Korea to using monetary tools in order to keep growth within bounds.