South Korea's headline consumer price index rose 2.8 percent on the year in January, decelerating further from an increase of 3.2 percent in December. Headline inflation has now fallen for four consecutive months from its recent peak of 3.7 percent, getting closer to the Bank of Korea's 2.0 percent target. The index advanced 0.4 on the month after no change previously.

Underlying price pressures also moderated in January. Core CPI, excluding food and energy, rose 2.5 percent on the year, down from 2.8 percent in December, and advanced 0.4 percent on the month after a previous increase of 0.2 percent.

The decline in headline inflation was broad-based across categories of spending. Food inflation moderated from 6.2 percent in December to 5.9 percent in January, the year-over-year increase in housing and utilities costs slowed from 2.7 percent to 1.8 percent, and transport costs fell at a slightly more pronounced pace, down 0.3 percent on the year after a previous decline of 0.2 percent.

At their most recent policy meeting, held last month, officials at the BoK left policy rates on hold at 3.50 percent, as they have since the start of 2023. This decision reflected officials' assessment that"inflation is projected to maintain its slowing trend". Officials also expressed confidence about the outlook for growth in 2024.

Consumer prices in January, which in December eased slightly to 3.2 percent from November's 3.3 percent, are expected to edge further lower to 3.1 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.