Issue Preventing demand-driven core inflation from becoming broad-based and entrenched in Korea

Summary

The issue analysis ends with a policy implication for judging the inflation outlook. Its central point is that tracking whether the economy recovers is not, on its own, a sufficient basis for judging prices. Monitoring must also cover how fast and how strongly the income gains of households and firms from strong exports and better terms of trade pass through to domestic consumption. At the same time, the authors call for vigilance so that core inflation driven by demand pressure does not spread across many items and become entrenched. The concern links the chip boom, household purchasing power and the persistence of underlying inflation into a single policy question.