South Korea’s consumer inflation yields higher than predicted. It hit a more than 13-year high in April. It boosts expectations in the bond market due to more central bank interest spikes. South Korea’s CPI (Consumer Price Index) delivers a shocking 4.8% raise in April compared to a year before. The speed is as fast as 4.1% in the previous month. Plus, it raised higher than 4.4.% raise in Reuters survey.
This phenomenon exceeds 11 economists’ predictions on the survey. Thus it marks the fastest annual growth since October 2008. The country stands above the central bank’s ⅖ target for a 13th consecutive month, said Todayonline. The benchmark of 10-year treasury bonds yields as high as 5.4 basic points to 3.426%. It is actually the highest since Mar 14, 2014.
The Bank of Korea conducted an internal meeting with officials to review the inflation data. The presiding deputy governor urged the need for authorities to handle inflation expectations. However there is no further action following the policy expectation adjustment. Ahn Jae-Kyun, a fixed-income analyst at Shinhan Financial Statement argued that the country does not change the view as the inflation data is based on supply factors. He suggested that he would wait and see how the demand-side trend would become in the next months.
Core inflation measuring price growth excluding energy and food, escalates modestly to 3.1% on a year-on-year basis. The central bank last month raised its benchmark interest rate by 25 basis points to 1.50%, said the analyst. It marks the fourth increase of the BOK’s base rate. The bank started a policy tightening cycle in August last year. It was one the first central banks in high-income countries.
The next meeting would be on May 26. It would also become the first debut for Rhee Chang-yong, a governor as the chair of the board. The May 10 meeting was the first prior to the first conduct of President Yoon Suk-yeol.
