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S.Korea inflation hits near decade-high, raising rate hike bets By Reuters


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© Reuters. FILE PHOTO: Girls take a look at their moblie telephones within the Hongdae space of Seoul, South Korea, June 29, 2016. REUTERS/Kim Hong-Ji

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By Joori Roh

SEOUL (Reuters) -South Korea’s client inflation accelerated to a close to 10-year peak in October, forcing the central financial institution to revise up its 2021 value projections and reinforcing the case for one more rate of interest hike this yr.

The buyer value index (CPI) jumped 3.2% from a yr earlier in October, authorities knowledge confirmed on Tuesday, the quickest development since January 2012 and sharply greater than a 2.6% rise in September.

That matched a 3.2% enhance tipped by analysts in a Reuters survey and remained above the central financial institution’s 2% goal for a seventh straight month.

The breakdown of knowledge confirmed the price of petroleum surged 27.3%, whereas that of housing leases and outside eating elevated 1.8% and three.2%, respectively, on yr.

That places the Financial institution of Korea’s (BOK) financial coverage board beneath strain to boost the bottom fee additional on the Nov. 25 assembly, following its first fee hike in virtually three years in August.

Governor Lee Ju-yeol final month flagged additional tightening might come as quickly as November to curb rising inflation and family debt.

Hours after the info launch, the BOK mentioned it expects annual CPI development for the entire of 2021 to hover above its 2.1% forecast launched in August.

The central financial institution will announce the revision of forecasts at its November assembly.

In the meantime, the finance ministry mentioned it’s going to purchase again 2 trillion received ($1.70 billion) of treasury bonds to stabilise native bond markets, after fee hike bets led to a selloff in bonds, pushing up the benchmark 10-year treasury bond yield to the very best since August 2018 final week.

Tuesday’s knowledge additionally confirmed core CPI rose 2.4% year-on-year, the quickest development since December 2015 and up from 1.5% in September.

Month-on-month inflation rose 0.1%, slowing from September’s 0.5% rise however in keeping with forecasts.

New guidelines geared toward shifting South Koreans towards “residing with COVID-19” got here into impact on Monday and are anticipated to spice up client spending, with curfews on eating places and cafes being lifted.

The federal government additionally determined to quickly minimize home tax on key oil merchandise by 20%, which is predicted to assist customers save as much as 2.5 trillion received over a six-month interval.

($1 = 1,175.4700 received)

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