South Korea's headline inflation expected to rise a bit despite renewed decline in oil 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%. 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. 

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%. 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. 

"We maintain our base scenario that headline inflation will rise above 1% near the end of this year thanks to the base effects from oil prices", notes Societe Generale.