Inflation in South Korea eased slightly in January but continued to remain above the central bank’s target, bolstering the case for winding back pandemic-era stimulus further to tame rising prices.
The benchmark consumer-price index rose 3.6% from a year earlier, the statistical office said Friday. That was down from December’s 3.7% rise but above the Bank of Korea’s 2% target.
The median forecast from economists polled by The Wall Street Journal was for a 3.4% increase.
January marked the fourth straight month of above-3% inflation and the 10th consecutive reading above the central bank’s target.
Inflation averaged 2.5% in South Korea in 2021 — the highest annual print in a decade.
Higher prices of oil and other raw materials as well as agricultural goods have continued stoking inflationary pressure.
Compared with the prior month, the index rose 0.6% in January after December’s 0.2% increase. The WSJ poll had tipped a 0.4% gain.
Core CPI, which strips out volatile energy and food prices, rose 2.6% from a year earlier in January compared with the prior month’s 2.2% gain. It rose 0.6% on month versus 0.4% in December.
The Bank of Korea has warned that inflation may overshoot its earlier forecast of 2.0% for 2022.
BOK Gov. Lee Ju-yeol said at the latest policy meeting in January that he expects inflation to rise above 3% for a while and average more than 2.5% for 2022, sharply higher than the central bank’s previous estimate.
Like other major central banks, the BOK has been tightening pandemic-era policy to fight inflation.
The BOK in January raised its base rate back to a pre-pandemic level of 1.25%, and Gov. Lee signaled more rate increases later in the year.
Minutes of the Jan. 14 meeting released late Thursday showed that a majority of the BOK board members opted to act preemptively against stronger-than-expected price growth and increasing financial imbalances.
Most analysts pencil in two or more rate increases in the coming months, given the BOK’s recent hawkish tilt.