Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

South Korea inflation hovers near 9-year peak, stoking rate-hike expectations

EconomyJul 01, 2021 11:55PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
2/2 © Reuters. FILE PHOTO: People wearing masks walk at Myeongdong shopping district amid social distancing measures to avoid the spread of the coronavirus disease (COVID-19), in Seoul, South Korea, May 28, 2020. REUTERS/Kim Hong-Ji/File Photo 2/2

By Joori Roh

SEOUL (Reuters) - Consumer inflation in South Korea stayed above 2% in June for the third consecutive month, hovering near a nine-year peak, adding pressure on policymakers to raise interest rates sooner rather than later.

Consumer prices rose 2.4% from the same month a year prior, government data showed on Friday, slightly missing analysts' 2.5% forecast and a tad off May's 2.6% - the fastest growth since April 2012.

The breakdown of data showed the cost of agricultural, livestock and fisheries products rose 10.4% on year, while that of petroleum surged 19.9%.

"As the impact from a low base of comparison persists over the coming months, and as fresh-food prices likely rise ahead of the monsoon season and Chuseok holiday, inflation will continue to stay above 2% for some time," said economist Kim Yeon-jin at Eugene Investment & Securities.

"The government's planned extra budget and cash handouts will likely lift the service sector and boost demand," Kim said.

On Thursday, the government announced a 33 trillion won ($29.08 billion) supplementary budget that included pandemic relief for households.

Many economists now see a base interest rate hike from the current record low of 0.50% as early as the third quarter of 2021, as house prices soar and inflation remains above 2%, even as the impact of last year's low base fades.

South Korea is seen to be Asia's first economy to pull back on pandemic-era monetary stimulus and normalise easy policy.

Bank of Korea (BOK) Governor Lee Ju-yeol said last week the bank will start normalising easy monetary policy by year-end.

"A third-quarter hike is possible if the recent surge in domestic virus cases is quickly contained and the vaccination roll-out regains strong momentum, but as things stand, a move in the fourth-quarter looks more likely," said ANZ economist Krystal Tan.

The BOK next reviews its policy rate at its July 15 meeting.


Consumer prices soared an average 1.8% during the first half of the year, versus 0.6% a year earlier and approaching the BOK's 2% target.

"I saw snack bars and ready-meal stores using quail eggs instead of just eggs because they got so expensive. Zucchinis and spring onions are also so expensive I stopped buying them," said 26-year-old homemaker Kim Sung-eun.

"Apples have also shot up in price, but I still buy them as drinking squashed apple juice every morning is a daily routine for me and my husband," she said.

"Our living expenses jumped nearly 20% in the first half of this year from last."

Rising input costs due to inflationary pressure is also straining South Korean manufacturers, with the BOK in a report this week saying 49% of 281 firms surveyed were passing higher costs to clients.

Meanwhile, the core consumer price index, which excludes volatile energy and food prices, came at 1.2%, unchanged from May when it rose at the sharpest pace since November 2018.

However, on a month-on-month basis, headline inflation was minus 0.1%, falling into negative territory for the first time in seven months, compared with positive 0.1% in May.

The BOK currently sees inflation at 1.8% for all of 2021 and 1.4% for 2022. It was 0.5% in 2020, just above the record low of 0.4% in 2019.

South Korea inflation hovers near 9-year peak, stoking rate-hike expectations

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email