Lowest Inflation Rate in 3 Years and 5 Months... Bank of Korea Says "Price Stability Continues"

August Consumer Price Inflation Rate 2%
Lowest in 3 Years and 5 Months
Bank of Korea "Price Stability Continues in September"

Vegetable section at Garak Agricultural and Marine Products Wholesale Market, Songpa-gu, Seoul. Photo by Jo Yongjun jun21@

The consumer price inflation rate in August recorded 2.0%, marking the lowest level in 3 years and 5 months. With inflation expected to remain around 2% in September as well, evaluations suggest that the inflation slowdown trend is becoming clear.

According to Statistics Korea on the 3rd, the consumer price index last month rose by 2.0% compared to the same period last year. This is a noticeable slowdown compared to the 2.6% recorded in the previous month. It is also the lowest level in 3 years and 5 months since March 2021, when it was 1.9%.

The Bank of Korea held a morning inflation status review meeting chaired by Deputy Governor Kim Ung on the same day and assessed that inflation in August dropped significantly due to a sharp slowdown in petroleum and agricultural product prices.

Petroleum prices rose by 0.1% in August, significantly less than the 8.4% increase in the previous month. This was the result of the combined effect of the decline in international oil prices and the base effect from the large increase a year ago.

The agricultural product price inflation rate continued to slow despite some vegetable price increases due to the heatwave, thanks to the shipment of new fruits. Agricultural product prices rose by 3.6% in August, a significant slowdown compared to the 9.0% increase in the previous month. Accordingly, the living cost inflation rate, which was 3.0% in July, fell to 2.1% in August.

The Bank of Korea expects inflation to remain stable at a similar level for the time being unless there is a major supply shock. Previously, the Bank of Korea had forecasted inflation to be in the low 2% range in August and around 2% in September. In fact, the August inflation rate was lower than the Bank of Korea’s forecast.

The Bank of Korea evaluated that South Korea’s inflation is stabilizing faster compared to major advanced countries. The inflation rate in the U.S. was 2.9% in July, and the Eurozone’s inflation rate was 2.2% in August.

Deputy Governor Kim Ung of the Bank of Korea stated, "Although the public has suffered greatly from high inflation, disinflation (the slowdown of inflation) is progressing rapidly. This is due to the Bank of Korea’s proactive monetary policies such as preemptive interest rate hikes, the government’s inflation stabilization measures, and sound fiscal policies."