South Korea Inflation Weakest Since Early 2021

South Korea’s inflation softened notably to the lowest in more than three years in August, adding chances of an interest rate cut as soon as next month.

Consumer price inflation softened to 2.0 percent in August from 2.6 percent in July, Statistics Korea reported Tuesday.

The rate came in line with expectations and hit the weakest level since March 2021, when the rate was 1.9 percent.

Core inflation that excludes prices of food and energy, slowed slightly to 2.1 percent in August from 2.2 percent a month ago. The rate fell to the lowest since November 2021.

On a monthly basis, the consumer price index gained 0.4 percent following a 0.3 percent rise. Economists had forecast prices to grow again by 0.3 percent.

With inflation trending down toward the central bank’s target range, the likelihood of an October cut has increased, economists at ING said.

“However, the reacceleration of mortgages and house prices in Seoul is likely to remain a significant drag and even with an October cut, we do not expect the BoK to deliver further cuts until early next year,” they said.

Last month, the Bank of Korea had kept its key interest rate unchanged for the thirteenth consecutive meeting at a 15-year high of 3.50 percent.

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