South Korea's inflation rate decreased significantly in August, reaching its lowest point in over three years, which raises the possibility of an interest rate cut as early as next month.
According to Statistics Korea, consumer price inflation dropped to 2.0 percent in August from 2.6 percent in July. This figure aligns with expectations and represents the weakest level since March 2021, when the rate was 1.9 percent.
Core inflation, which excludes food and energy prices, marginally fell to 2.1 percent in August from 2.2 percent in July, marking the lowest rate since November 2021.
On a month-to-month basis, the consumer price index increased by 0.4 percent, following a 0.3 percent rise in the previous month. Economists had predicted a 0.3 percent growth for August.
With inflation heading toward the central bank's target range, the chances of an interest rate cut in October have improved, according to economists at ING.
"However, the resurgence of mortgages and house prices in Seoul is likely to remain a significant hindrance. Even with an October rate cut, we do not anticipate further reductions by the Bank of Korea until early next year," they noted.
Last month, the Bank of Korea maintained its key interest rate at a 15-year high of 3.50 percent for the thirteenth consecutive meeting.
