South Korea's Inflation Holds at 3.2% in December

South Korea experienced a slight easing in its headline inflation for the second consecutive month in December 2023, with the average inflation rate settling at 3.6% for the year. The country's statistics office reported that the consumer-price index grew by 3.2% from the previous year, following a 3.3% growth in November.

Although the latest reading fell slightly below market expectations of 3.3%, it should be noted that lower oil and petroleum prices contributed to this outcome. Nevertheless, inflation remained above the central bank's target rate of 2.0%.

In comparison to November, the consumer-price index remained unchanged in December. However, it should also be highlighted that in November, there was a decrease of 0.6%.

Considering core CPI, which excludes volatile energy and food prices, there was a 3.1% increase from the previous year and a 0.2% increase from the previous month in December. This is slightly higher than the 3.0% on-year and 0.0% on-month growth observed in November.

Furthermore, it is worth noting that South Korea's inflation for the year 2023 averaged at 3.6%, aligning with the central bank's initial forecast. This figure is significantly lower than the 24-year high of 5.1% recorded in 2022.

The Bank of Korea recently projected that inflation would average at 2.6% in 2024, up from its previous estimate of 2.4%. The bank emphasized that despite this slight adjustment, inflation remains persistent in the country.

Going forward, the Bank of Korea has signaled its intent to maintain its base rate at 3.50% for an extended period before initiating any policy easing measures.