South Korea October headline inflation moderates ahead of expected rate hike

Seoul, Nov 3 - South Korea's headline inflation cooled in October, according to government figures released on Tuesday, offering a minor respite for policymakers but still remaining well above the 2.0% target. The consumer price index increased by 2.8% year-on-year, down from a 2.9% rise in September, and aligning closely with a 2.85% forecast from a Reuters poll of economists.

Expressed monthly, the CPI climbed by 0.2%, after a modest 0.3% surge in the prior month. Although the deceleration provides the Bank of Korea a reprieve, inflation continues to outpace the central bank's 2.0% objective. Global energy costs and escalating household debt are cited as factors contributing to persistent inflationary pressures in South Korea, the world's fourth-largest economy.

Market projections indicate that the Bank of Korea is likely to raise interest rates in the coming months, adhering to a stringent monetary policy to curb inflation. A separate survey suggests that consensus forecasts anticipate the peak policy interest rate to reach 3.50%, signaling one additional hike in November and another in the first quarter of 2027.