| Consensus | Actual | Previous | |
|---|---|---|---|
| CPI - M/M | 0.1% | 0.0% | 0.3% |
| CPI - Y/Y | 2.9% | 2.7% | 3.3% |
| Core CPI - M/M | 0.1% | 0.3% | |
| Core CPI - Y/Y | 3.5% | 3.9% |
Highlights
Consumer inflation in South Korea moderated at a faster pace than expected in June, easing further to 2.7 percent from 3.3 percent in May, 3.7 percent in April and a recent peak of 6.3 percent in July 2022, reflecting credit tightening by the Bank of Korea, but it is still above the bank's 2.0 percent target.
The 2.7 percent annual rate is the slowest pace of year-over-year increase since 2.4 percent in September 2021. The consensus call was a 2.9 percent rise. The total consumer price index (CPI) was unchanged on the month in June, after rising 0.3 percent previously.
The core CPI, which excludes volatile items of food and energy, rose 3.5 percent on the year in June, also slowing from 3.9 percent in May and 4.0 percent seen in the previous three months. The core reading rose 0.1 percent from May, when it rose 0.3 percent.
Transport costs fell 11.0 percent on the year in June, with the pace of decline accelerating from 6.9 percent in May while prices for clothing and footwear also slowed to a 7.8 percent gain from an 8.0 percent rise. Costs for furnishings, household equipment and routine maintenance rose 5.6 percent, slower than 6.0 percent the previous month.
On the upside, food prices climbed 4.2 percent on the year in June, accelerating from 3.9 percent in May, and housing and utilities costs also rose at a faster pace of 6.1 percent after rising 5.9 percent.
The Bank of Korea's next policy meeting is scheduled for July 13. At its last meeting on May 25, the bank left its main policy rate unchanged at 3.50 percent in line with the consensus forecast, leaving the cumulative amount of rate increases made since late 2021 at 275 basis points, with the policy rate at its highest level since 2008.
At the time, the bank projected that consumer inflation would"decline significantly in June and July" due to the increasing base effect of global oil prices, and then rise slightly to fluctuate at around 3 percent until the year-end.
The 2.7 percent annual rate is the slowest pace of year-over-year increase since 2.4 percent in September 2021. The consensus call was a 2.9 percent rise. The total consumer price index (CPI) was unchanged on the month in June, after rising 0.3 percent previously.
The core CPI, which excludes volatile items of food and energy, rose 3.5 percent on the year in June, also slowing from 3.9 percent in May and 4.0 percent seen in the previous three months. The core reading rose 0.1 percent from May, when it rose 0.3 percent.
Transport costs fell 11.0 percent on the year in June, with the pace of decline accelerating from 6.9 percent in May while prices for clothing and footwear also slowed to a 7.8 percent gain from an 8.0 percent rise. Costs for furnishings, household equipment and routine maintenance rose 5.6 percent, slower than 6.0 percent the previous month.
On the upside, food prices climbed 4.2 percent on the year in June, accelerating from 3.9 percent in May, and housing and utilities costs also rose at a faster pace of 6.1 percent after rising 5.9 percent.
The Bank of Korea's next policy meeting is scheduled for July 13. At its last meeting on May 25, the bank left its main policy rate unchanged at 3.50 percent in line with the consensus forecast, leaving the cumulative amount of rate increases made since late 2021 at 275 basis points, with the policy rate at its highest level since 2008.
At the time, the bank projected that consumer inflation would"decline significantly in June and July" due to the increasing base effect of global oil prices, and then rise slightly to fluctuate at around 3 percent until the year-end.
Market Consensus Before Announcement
Consumer prices in June, which in May slowed to 3.3 percent from 3.7 percent, are expected to slow further to 2.9 percent.
Definition
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.
Description
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.
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.
