South Korean headline inflation likely to have decelerated in October, BoK may hike policy rate again in November

South Korean consumer price data for the month of October is set to be released this week. According to a DBS Bank research report, the headline inflation is expected to have slowed down to 1.6 percent year-on-year in October from September’s 1.9 percent. Food prices are expected to have fallen after the Chuseok Festival, aiding in countering the inflationary impact of increased prices of oil.

Owing to the subdued domestic demand and sluggish labor market conditions, the core inflation rate is likely to have stayed soft at 1 percent. In spite of a benign inflation scenario and a softening growth prospect, the Bank of Korea is prioritizing the financial imbalance issues such as property price rises and capital outflows.

“The hawkish board members will likely continue to push for a 25bps rate hike at the next policy meeting on 30 November”, added DBS Bank.