[Economic Outlook] Will July Consumer Prices Stay in the 2% Range... Government Announces Plans to Expand Financial Support for Low-Income Households

[Sejong=Asia Economy Reporter Son Seonhee] Attention is focused on whether the inflation rate, which surged to the mid-2% range in the second quarter, will continue in July. The Statistics Korea is scheduled to announce the 'July Consumer Price Trends' on the 3rd.

The consumer price inflation rate recorded 2.3% in April, then rose to 2.6% in May, marking the highest level in 9 years and 1 month. Although the increase slowed somewhat to 2.4% in June, the inflation rate remained high.

The government expects the inflation rate to ease somewhat in the second half of the year and believes the annual inflation target of 'below 2%' can be achieved. It is anticipated that the base effect of last year's prices will ease and the supply of agricultural, livestock, and fishery products will recover in the second half. Attention is on whether this trend will be reflected in the July consumer price index.

The size of the current account surplus is also of interest. The Bank of Korea will release the 'June Balance of Payments' results on the 6th. The current account surplus in May was recorded at $10.76 billion (approximately 12.2018 trillion KRW). This is $8.52 billion more than the same month last year ($2.24 billion), marking the largest surplus ever recorded for May. It has been in surplus for 13 consecutive months since May last year and has exceeded $10 billion again after 5 months.

The significant increase in the current account surplus is due to strong exports and rising international freight rates, along with a substantial increase in dividend income received by domestic companies from their overseas subsidiaries. Attention is focused on how much the current account surplus decreased in June after the dividend income effect disappeared.

The financial authorities will announce plans to expand policy-based financial support for low-income households next week. The Financial Services Commission will expand this year's policy-based financial supply targets and unveil new products. The status of fund operation in the second quarter will also be disclosed.