Inflation continues to moderate; uncertainties remain: BOK

SEOUL, Inflation in South Korea will continue to moderate down the road, reaching a level below 2.5 percent in the second half of the year, but geopolitical risks, weather conditions and other uncertainties still remain, a central bank report said Tuesday. "Consumer price growth is expected to post a mild slowdown, given current trends in prices of global oil and farm goods," the Bank of Korea (BOK) said. "But there are still uncertainties in the inflation trajectory, such as geopolitical risks, economic trends and weather conditions," it said. In the first five months of the year, the country's inflation had moderated to 2.9 percent, compared with 3.3 percent during the second half of last year. Core inflation, which excludes prices of food and energy, stood at 2.4 percent during the cited period, also slowing from 3 percent in the June-December period. The country's consumer prices, a key gauge of inflation, rose 2.7 percent on-year last month, compared with the 2.9 percent on-year rise a month earlier. The BOK said global oil prices have recently fallen, but upward pressure still remains amid geopolitical risks. In terms of domestic demand, inflationary pressure is likely to be limited amid the outlook that private spending will remain weak this year. But a gradual phase-out of fuel tax cuts and a rise in utility costs may add upward pressure on inflation, the central bank said. Last month, the BOK kept its key interest rate unchanged at 3.5 percent for the 11th straight time. The central bank delivered seven consecutive rate hikes from April 2022 to January 2023. Earlier, BOK Gov. Rhee Chang-yong said the central bank may consider a potential rate cut if inflation cools down to around 2.3 percent to 2.4 percent. The central bank's inflation target is set at 2 percent. The bank kept its inflation outlook at 2.6 percent for the year. Last month, the central bank jacked up its growth estimate to 2.5 percent for the year, up from its earlier projection of 2.1 percent, but slashed the 2025 growth outlook to 2.1 percent from 2.3 percent. Source: Yonhap News Agency