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Inflation expectations in Korea register 1st dip in 8 months in August

Inflation expectations in Korea register 1st dip in 8 months in August

South Korea's inflation expectations have reportedly dipped for the first time in nearly eight months during the month of August, amid hopes that the nation's rapidly growing inflation may surge later this year.

According to the ordinary people that took part in a survey conducted by the Bank of Korea (BOK), consumer prices are expected to rise by 4.3% over the next year, falling from an all-time high of 4.7% a month earlier. This has been the first monthly decline registered since December 2021.

As per Hwang Hee-jin, a senior official at the BOK’s statistics research division, consumer attitude seems to have been affected by the government’s estimate pointing towards an anticipated rise in inflation in the H2 of this year amid speculations that the global inflation growth has almost reached its apex.

Authorities have been keeping a close watch on the data associated with an anticipated inflation, as even a minimal upswing may push consumers to demand wage hikes due to conjecture that the price rise will lead to a decline in their actual purchasing power. The wage rise can further boost the already soaring inflation rate.

South Korea has been dealing with growing inflation due to high commodity and oil prices, as well as rebounding demand from the ongoing crisis in Ukraine and the Covid pandemic, which have exacerbated global supply chain disruptions.

Consumer prices in the nation registered a 6.3% on year growth last month, increasing from a 6% on-year increase in June. Since consumer inflation increased 6.8% in November 1998, this has been the biggest year-on-year increase.

The BOK increased its benchmark interest rate in July by nearly 0.5 percentage points to 2.25%, the highest and sixth hike in borrowing costs since August 2021, to rein in the inflation rates.

Market observers anticipate that the central bank will presumably announce another quarter-percentage-point increase during its meeting on Thursday.

The data also indicated that the composite consumer sentiment index (CCSI) for August increased by 2.8 points from the prior month to 88.8.

The CCSI rebounded after the index in July fell to its lowest level since September 2020 as dramatic monetary tightening as well as skyrocketing energy prices globally fueled worries about a recession in the global economy.

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Omkar Patwardhan

Omkar Patwardhan started his professional career in the hospitality industry. Having nurtured a deep-sated passion for words however, he found his way into content writing and now pens down articles for numerous websites, including News Origins, spanning the sectors of business, finance, and technology.