BOK head says Korea inflation to dip below mid-2% in H2 2024

South Korea’s central bank chief expected consumer inflation to fall below the mid-2% level in the second half of 2024, adding to predictions of interest rate cuts next year to support a recovery in Asia’s fourth-largest economy.

“Headline inflation is likely to rise again above 3% in August and September, but it is expected to gradually decline below mid-2% around the second half of next year,” Bank of Korea Governor Rhee Chang-yong told lawmakers on Tuesday.

Consumer prices rose 2.3% in July from a year earlier, their slowest pace in 25 months. Annual core inflation, which excludes volatile food and energy prices, dropped to 3.3%, the lowest in 15 months.

Rhee’s comments came as some economists and financial market analysts have been expecting the BOK to cut its policy interest rate next year given that an economic recovery has yet to gain momentum and inflationary pressure continued to ease.

S&P Global Market Intelligence Asia-Pacific Chief Economist Rajiv Biswas last month predicted that Korea's central bank would slash the base interest rate by one percentage point in 2024.

BOK TO KEEP INTEREST RATE THIS WEEK

Rhee has repeatedly defied calls for a rate cut this year, keeping the door open for another hike last month after the monetary authority left the policy borrowing cost unchanged at 3.50%.

The BOK is unlikely to raise the rate this week, given the recent sluggish economic data such as export numbers for the first 20 days of August, analysts and investors said.

The central bank was forecast to leave the rate unchanged on Thursday, according to a survey of 100 bond market participants, including fund managers, by the Korea Financial Investment Association.

Some 92% of respondents bet on a freeze, while the rest expected a 25-basis-point hike, according to the poll.

Write to Ji-Yeon Sul at sjy@hankyung.com
 
Jongwoo Cheon edited this article.