South Korea's headline consumer price index rose 3.3 percent on the year in November, slowing from 3.8 percent in October and moving closer to the Bank of Korea's 2.0 percent target. The index fell 0.6 percent on the month after increasing 0.3 percent previously.

The decline in headline inflation was largely driven by food prices. These fell 2.6 percent on the month after mid-autumn holidays, with food price inflation slowing from 6.7 percent to 6.2 percent. Transport costs also weakened, falling 0.1 percent on the year after a previous increase of 2.0 percent.

Underlying price pressures also moderated in November. Core CPI, excluding food and energy, rose 3.0 percent on the year, down from 3.2 percent in October, and was unchanged on the month after a previous increase of 0.3 percent. Some categories of spending recorded smaller year-over-year price increases, including furnishings and household equipment and clothing and footwear, though others recorded slightly bigger increases.

At its most recent policy meeting, held last week, the BoK left its main policy rate on hold at 3.50 percent, as it has since the start of the year. Officials noted that the recent increase in headline inflation largely reflects higher energy and food prices and reiterated that they expect inflation to trend lower over the medium-term. Nevertheless, they revised their forecasts, with core inflation now expected to average 3.5 percent in 2023 and 2.3 percent in 2024, up from the previous forecasts of 3.4 percent and 2.1 percent respectively. Today's data will likely reinforce their view that inflation is trending lower and support the case for policy to remain on hold in coming months.

Consumer prices in November, which in October increased to 3.8 percent from September's 3.7 percent, are expected to edge back to 3.7 percent.

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.