South Korea’s inflation reaches its fastest rate in a decade

South Korea’s inflation reaches its fastest rate in a decade


South Korea’s inflation soared at the fastest rate in the past 10 years, as the country’s consumer price index rose 3.7% year-on-year in November, which exceeded economists’ expectations.

The monthly inflation data of Asia’s fourth-largest economy exceeded the expected 3.1% growth and has exceeded the Bank of Korea’s 2% target for eight consecutive months.

In August, South Korea became the first large economy in the region Raise interest rates, The central bank raised the benchmark interest rate from a historical low of 0.5% to 0.75%. Last week, interest rates increased again by 25 basis points to 1%.

Analysts attribute the November surge to rising food and oil prices in a country that relies heavily on imports.

Park Zongxun, head of research at Standard Chartered Bank in Korea, said: “Global supply chain issues are leading to an increase in agricultural and petrochemical products, and with the relaxation of social distancing rules, the number of people eating out in November has also increased significantly.”

Park said that the Korean won is weak-by Capital outflow As domestic and foreign investors are looking for opportunities elsewhere-they have pushed up import prices in the past year. But he added that there are signs that foreign investors are returning to the South Korean stock market.

“I expect high inflation to continue until the end of the first quarter of next year, and then begin to decline, even if it is still above the 2% target for some time to come,” Parker said.

Due to supply chain disruptions and bottlenecks, the recent increase in Covid cases, and unpredictable factors, South Korea’s economy is facing uncertainty President election It is scheduled to be held in March.Affected by the epidemic, exports cannot make up for the weak domestic spending in the third quarter, and GDP Only up 0.3%, Lower than 0.8% in the previous quarter.

South Korean policymakers must also deal with increasing domestic household debt. A November report from the Institute of International Finance showed that South Korea’s household debt-to-GDP ratio is 104.2%, ranking among the top of the 37 major economies in the world.

Health authorities announced the country’s first confirmed case of Omicron variant on Wednesday, so measures to ease social distancing restrictions in stages have stopped.

Later Slow start In terms of its vaccination plan, by early November, South Korea had fully vaccinated 80% of its population and had begun to implement a phased “coexistence with Covid” strategy.

However, the country’s statistics on coronavirus cases and severely ill patients have been hitting record highs, forcing the government to postpone the next phase of its reopening plan. On Wednesday, its number of Covid cases and severely ill patients exceeded 5,000 and 700, respectively, for the first time.

The authorities also imposed a 10-day mandatory quarantine period for anyone entering the country, regardless of their citizenship or vaccination status.

Analysts said that South Korean interest rate setters may stick to the current course.

Goldman Sachs analysts wrote in a research report: “Despite the soaring inflation, given the worsening of the pandemic situation, we continue to expect the Bank of Korea to remain cautious and maintain a gradual pace of normalization.”

“It is too early to judge the impact of the Omicron variant, and inflation is an urgent issue,” said Park of Standard Chartered Bank. “I expect the Bank of Korea to maintain a cautious hawkish stance for the time being.”

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