South Korea Oct consumer inflation accelerates for a third month

By Cynthia Kim

SEOUL (Reuters) -South Korea’s consumer inflation accelerated for a third month in October amid higher food costs, keeping policymakers on edge as they are monitoring whether current interest rates are tight enough to bring inflation to heel.

The consumer price index stood 3.8% higher in October from a year ago, marking the fastest gain since March 2023 and beating a 3.6% gain seen in a Reuters poll.

On a monthly basis, the index rose 0.3%, also beating a median 0.15% forecast.

The stickiness of inflation argues for the higher-for-longer interest rates scenario for the Bank of Korea, who kept rates unchanged on Oct. 19 and warned of inflationary risks from the Israel-Hamas conflict and global oil prices.

By categories, prices of fruits surged 24.6% in October from a year ago, coffee prices jumped 11.9%. An index of energy prices combining petroleum and electricity prices gained 2.8% from a year earlier.

“Slowing of inflation is expected to be more gradual than initially expected due to geopolitical risks in the Middle East and abnormally low temperatures,” Finance Minister Choo Kyung-ho said in a policy meeting on Thursday.

Most analysts expect the BOK to hold rates through the first quarter of next year and cut them by 25 basis points to 3.25% in the second quarter of 2024.

(Reporting by Cynthia Kim, Youn Ah Moon; Editing by Christian Schmollinger and Stephen Coates)