Headline Inflation Firms, Core Holds Steady
South Korea September CPI was stronger than expected. The m/m came in at 0.6%, versus 0.4% forecast and 1.0% prior. This left the headline y/y at 3.7% (3.5% forecast and 3.4% prior). Core (ex food and energy) rose 3.3% y/y, against a 3.3% forecast and 3.3% prior.
- Core inflation, based on this measure, has been steady around 3.3% for the third straight month, see the chart below.
- Looking at the detail, food inflation was 1.6% m/m, housing/utilities +1.3% m/m and transport +1.3% m/n. Working the other way, we saw modest falls in health (-0.1% m/m) and recreation and hotels (both -0.2% m/m).
- Of the 12 sub categories, 8 saw either the same y/y inflation pace or an acceleration versus August. Food, clothing, housing, furnishings and restaurants have y/y paces that are above headline inflation. Transport also moved back into a positive y/y pace (0.1%) after running negative for the past 6 months.
- Such a backdrop is likely to keep the BoK still cautious around the inflation backdrop. Note the next policy meeting is on the 19th of October. Finance Minister Choo stated that inflation is expected to stabilize again in October.
Fig 1: South Korea Inflation - Headline & Core Y/Y
Source: MNI - market News/Bloomberg