The renewed decline in crude oil prices should be reflected in retail oil prices despite the rise in USD/KRW exchange rates, although it will probably be offset by the seasonal hike in fresh food prices.
"South Korea's headline inflation is likely to have rebounded gradually on a year-on-year basis, though it would remain far below the BoK's target range of 2.5~3.5%. Month-on-month headline inflation would be steady at 0.2%", says Societe Generale.
Both services and core manufacturing sectors should continue to show steady inflation figures. Admittedly, oil prices and FX markets will generate a good deal of uncertainties about the near-term inflation outlook.
"Core inflation is likely to be pretty steady, mom inflation will probably reach 0.2% for a second consecutive month, while yoy inflation is expected to rise from 2.0% to 2.1%. However, headline inflation is expected to rise above 1% near the end of this year thanks to the base effects from oil prices", added Societe Generale.
