Korea’s inflation falls to 41-month low in August

President Yoon Suk-yeol visits NH Hanaro Mart in Seoul and listens to officials near the cabbage display ahead of Chuseok. [Courtesy of the Office of the President]

South Korea’s inflation eased to the lowest level in more than three years in August, with stabilized prices of oil and agricultural products, although consumption still remains sluggish amid the continued high interest rate environment.

According to data released by Statistics Korea on Tuesday, the country’s consumer price index (CPI) rose 2 percent year over year in August, the lowest since 1.9 percent in March 2021.

The index had remained in the 3 percent range until March 2024 before falling to 2.9 percent in April and 2.4 percent in June.

Although the index rose slightly to 2.6 percent in July, it fell to 2 percent the following month, reaching the target set by the Bank of Korea.

“The overall inflation rate slowed in August as the increase in oil and agricultural product prices substantially shrank,” said Kong Mi-sook, a director at Statistics Korea.

Prices of petroleum products, which had surged due to rising international oil prices, rose 0.1 percent in August, a significant drop from 8.4 percent in July.

Agricultural prices also stabilized.

Prices of agricultural, livestock, and fisheries products rose 2.4 percent in August from a year earlier, with agricultural products increasing by 3.6 percent compared to 9 percent in July.

While prices for some items, including pears (120.3 percent) and apples (17.0 percent), remained unstable due to unusual weather conditions, the overall price surge fell in August.

The price of Chinese cabbage, which saw a supply decrease due to heatwaves and heavy rain, rose 9.6 percent.

Bank of Korea Governor Rhee Chang-yong, in the meantime, said Tuesday that the time has come to “sufficiently consider” a benchmark rate cut as the country‘s consumer inflation has stabilized.

“In terms of stability of consumer prices, it is time to sufficiently consider lowering a benchmark interest rate,“ Rhee told reporters at a forum in Seoul. ”We should consider an appropriate timing for a rate cut, taking into account financial stability and other factors.“