South Korea's headline consumer price index rose 5.2 percent on the year in January, up from 5.0 percent in December and above the consensus forecast of 4.9 percent. Headline inflation has now been above the Bank of Korea's 2.0 percent target for 22 consecutive months. The index rose 0.8 percent on the month after advancing 0.2 percent previously.

Underlying inflation was steady and strong in January. Core CPI, excluding food and energy, rose 0.6 percent on the month after a previous increase of 0.3 percent with the year-over-year increase unchanged at 4.1 percent.

The small increase in headline inflation in January was driven by food prices, up 5.8 percent on the year after a previous increase of 5.0 percent, and utilities prices, up 8.0 percent after a previous increase of 7.1 percent. This was partly offset by a smaller increase in transport prices, with year-over-year changes in prices for most other categories relatively steady.

At the BoK's most recent policy meeting, held mid-January, officials raised the main policy rate by 25 basis points to 3.50 percent, taking the cumulative amount of rate increases made since late 2021 to 275 basis points. Officials expect inflation will be 3.6 percent in 2023 but note that uncertainty about the outlook is high, citing the impact of energy price increases and global economic weakness. Based on this forecast, officials advised that any further rate increases will be based on assessment of"economic downside risks and financial stability risks".

Consumer prices in January are expected to edge marginally lower to 4.9 percent from 5.0 percent in December.

The Consumer Price Index (CPI) is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Annual changes in the CPI represent the rate of inflation.

An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets and your investments.

Inflation (along with various risks) basically explains how interest rates are set on everything from mortgages and auto loans to government securities. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities and your portfolio, often in a dramatic fashion.

By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.