South Korea’s December Inflation Holds at 5.0%, Suggesting Further Tightening

On Friday, official statistics reported that South Korea’s inflation rose 5.0% from a year earlier in December, in line with market expectations and the rate seen in November. This could mean that the central bank would tighten monetary policy further in the new year.

Consumer prices rose 5% year on year, matching November’s rate, according to the statistics office on Friday. Inflation was projected to rise to 5.1% by economists.

The data comes after inflation slowed sharply in November, owing partly to the Bank of Korea’s warning about a base effect. As long as inflation remains within the 5% target range, the central bank has made it clear that it will continue down its current path of policy tightening.

The central bank said that it projected annual inflation to linger around 5% through early 2023, with both upside and downside risks.