South Korea's consumer inflation quickens in Dec amid faltering won
FILE PHOTO: A woman shops at an underground shopping district in the Gangnam area of Seoul, South Korea, June 28, 2016. Picture taken June 28, 2016. REUTERS/Kim Hong-Ji/File Photo
SEOUL :South Korea's consumer inflation quickened in December, exceeding market expectations amid a weak local currency though it was still lower than the central bank's target.
The consumer price index rose 1.9 per cent in December from a year earlier, after a rise of 1.5 per cent in November, Statistics Korea data showed on Tuesday.
It was the fastest year-on-year rise in four months and topped a median 1.7 per cent increase forecast in a Reuters survey of economists, but weaker than the central bank's medium-term target of 2 per cent.
"Although price pressures are being limited by sluggish domestic demand, it is necessary to keep in mind that the won's continued weakness might pressure import prices and affect consumer prices with a time lag," said Chun Kyu-yeon, an economist at Hana Securities.
In December, the won weakened 5.2 per cent against the dollar, the biggest monthly drop in 22 months, as heightened domestic political uncertainty added to the drag.
Following the release of the data, the Bank of Korea said there was a possibility of inflation quickening more next month driven by recent weakness in the local currency. Still, it is expected to stay below 2 per cent from February due to weak demand-side pressure, it added.
Last week, the central bank said it would lower interest rates more next year to mitigate downside pressures on economic growth, after delivering its first back-to-back rate cuts since 2009 at the final policy meeting of the year.
In 2024, the CPI rose 2.3 per cent, after rising 3.6 per cent in 2023, marking the slowest annual rise in four years.
