Korea’s core inflation surges to 25-year high despite slowing consumer prices

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Despite a recent dip in consumer prices in South Korea, the core inflation, which reflects long-term price trends, has experienced its most significant increase since the foreign exchange crisis 25 years ago, government data showed on Monday.

When considering weather-related variables like scorching heatwaves and typhoons, as well as the rising trend in public utility fees, concerns arise that inflation could pick up again in the second half of the year.

According to the data from Statistics Korea, the core inflation index, which excludes energy and unprocessed food products components, rose by 4.5 percent year-to-date up to July. This marks the highest level since the same period in 1998 when it recorded a 6.8 percent increase during the foreign exchange crisis. The latest surge in core inflation even surpasses the 4.2 percent recorded during the global financial crisis in the same period of 2009.

The core inflation index excludes items like agricultural products and petroleum, which are heavily influenced by fuel prices and weather. Instead, it focuses on providing a more stable indicator of the long-term trend of price fluctuations.

The rise of 4.5 percent in the core inflation index is higher than the year-to-date increase of 3.7 percent in the consumer price index. The domestic consumer price index had declined from the 5 percent range at the start of the year to around 2 percent recently, primarily driven by the fall in energy prices, including petroleum products.