South Korea's August Inflation Quickens to 3.1% on Base Effects

South Korea's consumer inflation accelerated in August, though the pace of price growth remained softer than market expectations. Official data released on Wednesday showed the consumer price index (CPI) climbed 3.1% from a year earlier, compared with a 2.8% rise in July. Economists polled had anticipated a median increase of 3.2%.

The quickening was largely attributed to a one-off statistical effect. Public service costs surged 6.5% year-on-year, driven by a 26.7% spike in mobile service fees — a consequence of temporary price discounts offered in August last year that created a low base for comparison. Meanwhile, petroleum prices rose 14.2%, a slight moderation from the 15.5% increase recorded in July.

The finance ministry noted that excluding the mobile fee effect, inflation would have been considerably softer at 2.5%. It also highlighted that nationwide fuel price caps helped shave 0.3 percentage points off the headline rate last month. The ministry expressed expectations that inflation would ease further in September.

On a monthly basis, the CPI rose 0.2% in August, recovering from a 0.2% decline in July, though slightly below the 0.3% uptick economists had projected. Core inflation, which strips out volatile food and energy prices, accelerated to 3.4% year-on-year — the fastest pace since May 2023 — up from 2.6% in July.

The data comes on the heels of the Bank of Korea's second consecutive interest rate hike last week, as policymakers continue to grapple with inflation running above target and persistent financial stability risks.