South Korea’s inflation slows to 2.8% in October

South Korea’s consumer prices rose 2.8% in October from a year earlier, government data released on 3 November showed, slowing from 2.9% in September. The reading remained above the Bank of Korea’s 2% inflation target.

Prices still rose overall: the monthly increase was 0.2%, compared with 0.3% in September. The annual reading was slightly below the 2.85% forecast in a Reuters poll of economists.

Rate decision ahead

The central bank unanimously held its policy rate at 3% on 22 October, after raising it by a quarter of a percentage point in both July and August. Before those increases, it had held the rate at 2.50% for more than a year.

At the October meeting, Governor Shin Hyun-song said policymakers had room to assess incoming data, including third-quarter real GDP and October inflation, before their next move. He said upside risks to growth and inflation appeared to have increased compared with the August forecasts. He said growth and inflation appeared likely to exceed the bank’s August projections, making it necessary to maintain a restrictive policy stance. He said the bank would respond until it was confident inflation would settle sustainably at the 2% target.

Reuters described elevated global energy prices and rising household borrowing as pressures accompanying widespread expectations that the Bank of Korea would raise rates in the coming months.

A separate poll cited by Reuters forecast a peak policy rate of 3.5%, with increases in November and the first quarter of 2027. Those increases have not been decided. In an Aju Press poll, JPMorgan economist Park Seok-gil forecast a peak of 3.75%, with three further quarter-point increases through the second quarter of 2027.

The Bank of Korea’s next rate-setting meeting is scheduled for 26 November, when it will also publish updated growth and inflation forecasts.