BOK says inflation to ease in Sept. but underlying pressures to persist

The Bank of Korea anticipates inflation to decelerate in September, following its acceleration in the prior month, as the base effect diminishes, according to a statement released on Wednesday. Deputy Governor Lee Ji-ho explained that the consumer price index increased at a faster pace in August due to the residual impact of discount programs implemented by a telecommunications firm the previous year.

Nevertheless, the central bank projects that the underlying upward trend in prices will persist, particularly in core items. Earlier, government statistics revealed that South Korea's consumer prices surged 3.1% year-on-year in August, propelled by elevated oil prices and higher mobile service subscription charges stemming from base effects resulting from substantial discounts provided last year, in the aftermath of a hacking incident.

This marked a recovery from the 2.8% year-on-year increase in July, succeeding 3.1% and 3.2% rises in May and June, respectively. Although headline inflation is anticipated to ease in September due to the fading base effect, underlying price pressures are expected to remain elevated. Core inflation, which excludes volatile food and energy prices, expanded by 3.4% year-on-year in August, reaching its highest level since it peaked at 3.8% in May 2023.