By Jihoon Lee
SEOUL (Reuters) – South Korea’s consumer inflation accelerated in December, beating market expectations on a weak local currency, although still below the central bank’s target.
The consumer price index rose 1.9% in December from a year earlier, after rising 1.5% in November, Statistics Korea data showed on Tuesday.
It was the fastest year-on-year growth in four months and exceeded the median increase of 1.7% forecast in a Reuters poll of economists, but weaker than the central bank’s medium-term target of 2%.
“Although price pressures are limited by weak domestic demand, it should be noted that continued weakness of the won could pressure import prices and affect consumer prices over time,” said Chun Kyu-yeon, economist at Hana Securities.
In December, the won weakened 5.2% against the dollar, its biggest monthly decline in 22 months, as heightened domestic political uncertainty added a drag.
After the data release, the Bank of Korea said there was a possibility that inflation could accelerate further next month, driven by the local currency’s recent decline. However, it is expected to remain below 2% from February due to weak pressure on the demand side, it added.
Last week, the central bank said it would cut interest rates further next year to ease negative pressures on economic growth, after making its first consecutive rate cuts since 2009 at the year’s final policy meeting.
In 2024, the CPI rose 2.3%, after growing 3.6% in 2023, the slowest annual growth in four years.
