By Choonsik Yoo
SEOUL (Reuters) -South Korea’s consumer inflation eased for a third consecutive month to a 14-month low in April and the central bank expects the downward trend to persist for some time, supporting the market’s view that its policy tightening cycle is over.
The consumer price index (CPI) stood 3.7% higher in April than a year earlier, the Statistics Korea data showed on Tuesday, marking the slowest growth since February last year and following a 4.2% increase in March.
It roughly matched a 3.75% rise tipped in a Reuters survey.
The Bank of Korea (BOK) issued a broadly dovish statement, although it repeated that uncertainty remained high over the future path of inflation.
“The consumer price growth will show a clearly slowing trend through the middle of this year, while the core price growth will show a trend of easing at a slower pace than the headline inflation,” it said.
Core inflation, which excludes volatile foods and energy items, held steady for a third consecutive month at 4.0% in April on an annual basis.
Analysts said the central bank’s dovish comments supported their expectations that it would cut or consider cutting interest rates later this year.
“We expect the inflation to fall below 3% in the third quarter and the Bank of Korea to consider cutting rates soon thereafter,” said Kim Myoung-sil, fixed-income analyst at HI Investment & Securities.
The BOK has an official annual inflation target of around 2%.
The central bank held interest rates steady at the last two successive policy meetings after raising them by 300 basis points since late 2021. It next reviews policy on May 25.
(Reporting by Choonsik Yoo; Editing by Kim Coghill and Shri Navaratnam)
