Korea's expected inflation hits 11-month low

South Korea's expected inflation has hit a record low of 3.7% in 11 months in April 2023. While the consumer price index rose by 4.2% last month, which is still higher than the Bank of Korea's inflation target of 2%, consumers expect prices to fall further.

According to the "Consumer survey for April 2023" released on Wednesday by the Bank of Korea, which surveyed 2,500 households nationwide from April 11-18, the expected inflation rate fell 0.2 percentage points to 3.7% from March's 3.9%. This is the lowest point since May 2021 (3.3%).

Hwang Hee-jin, head of the Bank of Korea's statistical survey team, explained that although processed food, utilities, and service prices are still high, the expected inflation rate has declined due to the impact of falling oil prices and a slowdown in the rise of processed food prices.

The expected inflation rate is the consumer price index that consumers expect to rise over the next year. It rose from 3.8% in December 2022 to 3.9% in January 2023 and 4.0% in February 2023 before falling to 3.9% in March and declining for two consecutive months.

As the expected inflation rate falls, the April interest rate level expectation index also fell 9 points to 111 from March's 120, the lowest level since February 2021 (104). If more people expect interest rates to rise in six months compared to the present, this index exceeds 100. Currently, more people still expect interest rates to rise, but the number has decreased.

The April housing price expectation index (87) rose 7 points from March, as the decline in housing prices slowed down and the volume of housing transactions rebounded. The overall Composite Consumer Sentiment Index (CCSI) for April rose 3.1 points to 95.1 from March's 92.0.

Write to Jin-gyu Kang at josep@hankyung.com