| Consensus | Consensus Range | Actual | Previous | |
| CPI - M/M | 0.3% | 0.2% to 0.3% | 0.1% | 0.5% |
| CPI - Y/Y | 3.3% | 3.2% to 3.4% | 3.2% | 3.1% |
| Core CPI - M/M | 0.0% | 0.5% | ||
| Core CPI - Y/Y | 2.5% | 2.5% |
Highlights
South Korea's headline consumer price index rose 3.2 percent on the year in June, picking up from an increase of 3.1 percent in May. The index rose 0.1 percent on the month after a previous increase of 0.5 percent. Food price inflation picked up from 1.6 percent to 2.0 percent.
Core CPI, excluding food and energy, was flat on the month after a previous increase of 0.5 percent, with the year-over-year increase unchanged at 2.5 percent. Steady core inflation in June reflects offsetting moves in major categories.
Market Consensus Before Announcement
CPI seen up 0.3 percent on month and 3.3 percent on year in June after 0.5 percent and 3.1 percent in May. The year on year figure moving even higher above 3 percent is bad news as rising prices for imported commodities brings more inflation pressure. Markets increasingly expect the Bank of Korea to respond by raising rates by 25 basis points in July to keep a lid on inflation contagion.
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.