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SEOUL, April 3(Reuters) – South Korea’s annual inflation slowed in March and moved further below from the central bank’s 2 percent target, cementing a consensus view that the bank’s monetary tightening will be gradual this year.
The consumer price index rose 1.3 percent in March from a year earlier, Statistics Korea said, slowing from 1.4 percent in February and falling short of the 1.6 percent rise seen in a Reuters poll of economists.
Prices unexpectedly fell 0.1 percent from a month earlier versus the 0.2 percent tipped in the poll.
“Home rental prices and food costs are stabilising,” said Stephen Lee, an economist at Meritz Securities.
Lee expects the Bank of Korea to raise its policy interest rate in May, but noted that a strong won and slipping housing prices could further weaken inflationary pressure and delay policy tightening.
Benchmark inflation has held below the BOK’s 2 percent target since October last year, making inflation a hurdle to any monetary policy tightening this year after its last hike to 1.50 percent in November.
Housing rents grew just 0.9 percent in March from a year earlier, while meat prices have come down 3.9 percent.
A sub-index for fresh produce costs increased 1 percent on-year after jumping 4.3 percent in February. Prices of strawberries fell 23 percent while prices of chives and cucumbers dropped 23 percent and 21 percent, respectively.