South Korea’s Inflation Slows in February, Easing Pressure on Policymakers

South Korea’s consumer inflation eased for the first time in four months, offering some relief to policymakers eyeing further monetary easing. According to Statistics Korea, the consumer price index (CPI) rose 2.0% year-over-year in February, down from 2.2% in January. The figure slightly exceeded economists’ median forecast of 1.95%.

The slowdown follows a six-month high in January, driven by a weak won, which had pushed inflation beyond the Bank of Korea’s (BOK) 2% target. However, the won has strengthened 2% against the U.S. dollar this year, trading at 1,444.2 per dollar on Thursday. This rebound comes after the currency plunged over 12% last year—its steepest decline in 16 years—amid domestic political instability.

“Inflation is expected to hover around the target level due to mixed factors, including a weak currency and low demand pressure,” the BOK stated following the data release.

Last week, the central bank cut interest rates and signaled further easing in 2024, shifting its stance to support growth in Asia’s fourth-largest economy.

On a monthly basis, CPI increased 0.3%, down from 0.7% in January but slightly above economists’ 0.2% projection.

With inflation cooling and monetary easing on the horizon, investors and policymakers are closely watching economic trends that could impact South Korea’s financial markets and long-term growth.