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S.Korea's Slowest Inflation in 10 Months

South Korea's consumer inflation hit a 10-month low in February, leading to speculation that the central bank has ended its policy tightening cycle. Asia's fourth-largest economy is at risk of entering a recession, making policymakers cautious about tightening monetary policy.

Bank of Korea
Bank of Korea

Slowing Pace of Private Service Prices

The consumer price index rose 4.8% in February, a slower rate than January's 5.2% increase. The annual core inflation, which excludes food and energy prices, dropped to 4.0%, the lowest rate since August. The Bank of Korea stated that inflation would continue to ease this year.

BOK Holds Interest Rates Steady

The Bank of Korea held interest rates steady last month after a year of continuous hikes. The bank stated that the monetary tightening campaign would not resume if inflation followed its expected path toward moderation.

Signs of a Possible Recession

Data from last week showed that South Korea might be headed for a recession, with persistently weak exports and domestic retail sales. Prices for livestock products fell 3.2%, and petroleum products slid 1.3%, contributing to the lower inflation rate.

Inflation Slowdown to Become Clearer in Coming Months

The inflation index rose 0.3% monthly, compared to the 0.8% increase the previous month. Finance Minister Choo Kyung-ho stated that the inflation slowdown would become clearer in the coming months unless there was an external shock. The South Korean three-year treasury bond futures rose due to a fall in U.S. Treasury yields.

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