South Korean inflation eases to 10-month low in July, stays lower than expected

Consumer prices in South Korea fell to 10-month low during the month of July, remaining slightly below what markets had earlier expected, weighed by softer local demand and low energy-import costs.

South Korea’s consumer price index rose 0.7 percent in July from a year earlier, data released by Statistics Korea showed Tuesday. That was below the median estimate of 0.8 percent according to a Reuters poll and slower than the 0.8 percent rise witnessed in June. July inflation rose at the slowest pace since September 2015, records showed.

The index rose 0.1 percent from the previous month, versus the survey's projection for a 0.2 percent gain. Core CPI, which excludes oil and agricultural products, rose 1.6 percent from a year ago, which matched the reading for May.

In addition, service costs, however, posted a 1.9 percent gain in the same period, marking the slowest increase since June 2015. Despite efforts by the central bank to boost consumer spending by lowering the interest rate to a record low of 1.25 percent in June, the benchmark inflation index remains well below the central bank's 2 percent target.

Moreover, other key economic indicators released prior to the central bank meet on August 11, include exports, which extended a slump and industrial production that missed expectations in June from a month ago.

Meanwhile, low inflation, even with the impact of higher oil costs is supportive of the fact that the Bank of Korea may consider cutting rates further in the coming months.