South Korea’s consumer inflation quickens in Dec amid faltering won
8:46 pm Monday, December 30th, 2024
By Jihoon Lee
SEOUL (Reuters) -South Korea’s consumer inflation quickened in December, exceeding market expectations amid a weak local currency though it was still lower than the central bank’s target.
The consumer price index rose 1.9% in December from a year earlier, after a rise of 1.5% in November, Statistics Korea data showed on Tuesday.
It was the fastest year-on-year rise in four months and topped a median 1.7% increase forecast in a Reuters survey of economists, but weaker than the central bank’s medium-term target of 2%.
“Although price pressures are being limited by sluggish domestic demand, it is necessary to keep in mind that the won’s continued weakness might pressure import prices and affect consumer prices with a time lag,” said Chun Kyu-yeon, an economist at Hana Securities.
In December, the won weakened 5.2% against the dollar, the biggest monthly drop in 22 months, as heightened domestic political uncertainty added to the drag.
Following the release of the data, the Bank of Korea said there was a possibility of inflation quickening more next month driven by recent weakness in the local currency. Still, it is expected to stay below 2% from February due to weak demand-side pressure, it added.
Last week, the central bank said it would lower interest rates more next year to mitigate downside pressures on economic growth, after delivering its first back-to-back rate cuts since 2009 at the final policy meeting of the year.
In 2024, the CPI rose 2.3%, after rising 3.6% in 2023, marking the slowest annual rise in four years.
(Reporting by Jihoon Lee; Editing by Sandra Maler and Shri Navaratnam)
