South Korea's October Inflation Eases to 2.8% but Stays Above Central Bank Target

what happened

South Korea's headline consumer price index rose 2.8% year on year in October, down from 2.9% in September, the Ministry of Data and Statistics said. The reading stayed above the Bank of Korea's 2% target and matched the median forecast of a Wall Street Journal survey of nine economists. Month on month, consumer prices rose 0.2%, also in line with forecasts. Core inflation, which excludes food and energy, was 2.8% on the year and 0.4% on the month.

Gasoline prices climbed 12% and diesel 20% from a year earlier, while smartphones and computers also rose sharply. Higher global oil prices linked to the prolonged Middle East conflict are adding pressure on South Korea, which relies heavily on imported energy.

why it matters

The Bank of Korea raised rates in July and August, then held at 3.00% last month. It will weigh this data before its decision later this month, and with third-quarter growth of 1.0% driven by AI investment and chip exports, the case for further tightening is strengthening.

market impact

Won and Korean bonds: tighter central bank policy amid strong growth supports the won and pushes yields up

• ▼Won (USD/KRW) pressure down — expectations of a further Bank of Korea rate hike support the national currency
• ▼Korean government bonds pressure down — expectations of higher rates pressure bond prices

tags

instruments