Overseas IB "South Korea's Inflation Rate 2.4% Next Year"…Raises Forecast Due to High Oil Prices

This Year's Forecast at 3.5%... Possibility of Further Upward Revision

Foreign investment banks (IBs) are consecutively raising their inflation rate forecasts for South Korea. This reflects the consideration that the pace of inflation slowdown is inevitably slow due to factors such as rising international oil prices.

According to the International Financial Center on the 7th, the average forecast for South Korea's consumer price inflation rate next year mentioned in reports by eight major investment banks as of the end of October was 2.4%.

This figure aggregates forecasts from Barclays, Bank of America Merrill Lynch, Citi, Goldman Sachs, JP Morgan, HSBC, Nomura, and UBS, showing a 0.2 percentage point increase compared to the previous month's average forecast of 2.2%.

By company, HSBC and Citi raised their forecasts from 2.1% and 2.3% respectively to 2.5%, while Nomura adjusted its forecast upward from 1.7% to 2.3%.

Among them, only three?Nomura, UBS (2.3%), and JP Morgan (2.2%)?issued forecasts below the average of 2.4%.

Not only for next year but also the average forecast for this year has increased. The average forecast for South Korea's consumer price inflation rate this year by the eight investment banks rose by 0.1 percentage points from 3.4% as of the end of September to 3.5% as of the end of last month.

Earlier, the Bank of Korea also projected an annual consumer price inflation rate of 3.5% for this year and 2.4% for next year in its August economic outlook report, which generally aligns with the major IB forecasts.

However, in its monetary policy direction statement on the 19th of last month, the Bank of Korea assessed that "the timing for the inflation rate to converge to the Bank's target level (2%) is likely to be delayed compared to initial expectations," lending weight to speculation that the inflation forecast may be revised upward in the economic outlook update scheduled for November.

Bank of Korea Governor Lee Chang-yong also stated on the 1st, “Concerns increased after the international oil price fluctuations in August and September, following a period of inflation stabilization,” adding, “If oil prices reach $90, the Bank of Korea’s forecasts could change significantly.”