| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| CPI - M/M | 0.2% | 0.0% to 0.2% | 0.2% | 0.3% |
| CPI - Y/Y | 2.1% | 1.9% to 2.4% | 2.1% | 2.0% |
| Core CPI - M/M | 0.2% | 0.1% | ||
| Core CPI - Y/Y | 1.9% | 1.8% |
Highlights
South Korea's headline consumer price index rose 2.1 percent on the year in March, up from an increase of 2.0 percent in February. The index rose 0.2 percent on the month after increasing 0.3 percent previously.
Underlying inflation also picked up slightly in March. Core CPI, excluding food and energy, rose 0.2 percent on the month after a previous increase of 0.1 percent, with the year-over-year increase increasing from 1.8 percent to 1.9 percent. Core CPI inflation has been at 1.8 percent or 1.9 percent for the last six months.
Higher headline inflation was largely driven by an increase in food price inflation from 2.0 percent to 2.4 percent. Transport costs, in contrast, rose at a slower pace, up 1.5 percent on the year in March after an increase of 2.2 percent in February, while the year-over-year increase in housing, utilities & fuel costs eased slightly from 2.0 percent to 1.9 percent. Price increases in other categories were generally steady.
At its most recent meeting, held late February, the Bank of Korea lowered its main policy rate by 25 basis points from 3.00 percent to 2.75 percent, in line with the consensus forecast. This is the third rate cut in the last four meetings. In the statement accompanying the decision, officials expressed confidence that inflation will remain stable, retaining their forecast for annual headline inflation to be 1.9 percent this year and for annual core inflation to be 1.8 percent. The next policy meeting will take place mid-April.
Underlying inflation also picked up slightly in March. Core CPI, excluding food and energy, rose 0.2 percent on the month after a previous increase of 0.1 percent, with the year-over-year increase increasing from 1.8 percent to 1.9 percent. Core CPI inflation has been at 1.8 percent or 1.9 percent for the last six months.
Higher headline inflation was largely driven by an increase in food price inflation from 2.0 percent to 2.4 percent. Transport costs, in contrast, rose at a slower pace, up 1.5 percent on the year in March after an increase of 2.2 percent in February, while the year-over-year increase in housing, utilities & fuel costs eased slightly from 2.0 percent to 1.9 percent. Price increases in other categories were generally steady.
At its most recent meeting, held late February, the Bank of Korea lowered its main policy rate by 25 basis points from 3.00 percent to 2.75 percent, in line with the consensus forecast. This is the third rate cut in the last four meetings. In the statement accompanying the decision, officials expressed confidence that inflation will remain stable, retaining their forecast for annual headline inflation to be 1.9 percent this year and for annual core inflation to be 1.8 percent. The next policy meeting will take place mid-April.
Market Consensus Before Announcement
CPI expected up 0.2 percent in March from February and up 2.1 percent on year.
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.
