The fall in South Korea's consumer inflation in July exceeded market expectations, and the year-on-year growth rate fell below 3%. Last month, the price increase in the country once rose to the highest level since the end of 2023. This data gives policymakers breathing room. According to data released by the Korea Statistics Agency on Tuesday, consumer prices rose 2.8% year on year in July, slowing down from 3.2% in June, the lowest since April. The median media forecast for the economists' survey was 3%. Excluding volatile food and energy prices, core inflation rose slightly to 2.6%. This shows that although overall inflation has cooled down, the underlying price pressure has remained generally stable. Although slowing inflation is expected to ease market concerns that inflation is once again accelerating upward, the current level of inflation is still significantly higher than the Bank of Korea's 2% policy target, so it is likely that it will not change the central bank's policy path. South Korean officials continue to state that price resilience, economic growth, and high housing prices require the central bank to maintain an austerity policy trend. Prior to the release of this inflation data, the Bank of Korea raised the benchmark interest rate by 25 basis points to 2.75% last month. This is the first rate hike since January 2023. Central Bank Governor Shin Hyun-song said that due to the continuing impact of the situation in the Middle East, inflation is expected to continue above the 2% target for a long period of time; whether to raise interest rates further in the future will depend on price pressure, economic growth, and financial market stability.

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