South Korea: Inflation remained elevated in January – UOB

Economist at UOB Group Ho Woei Chen, CFA, reviews the latest inflation results in South Korea.

Key Takeaways

“South Korea’s headline and core inflation were both above expectations in Jan. Although the headline inflation is expected to moderate due to a high comparison base, it will likely fall within the BOK’s 2% target only in 4Q22. We expect inflation to average 2.6% in 2022, exceeding the decade-high of 2.5% in 2021.”

“We still foresee another 50bps interest rate hike to 1.75% by end-2022, likely by 25 bps each in 2Q and 3Q.”

“Resilient external demand continued to buoy the outlook for South Korea’s manufacturing and exports, consistent with gains in raw materials and intermediate goods imports as well as further improvement in Markit South Korea manufacturing PMI to 6-month high of 52.8 in Jan from 51.9 in Dec.”

“Thus far, the impact of the extended social curbs has been relatively muted as consumer confidence rebounded in Jan.”