Trend Korean core inflation likely to stay in the mid-to-upper 2 percent range for a prolonged period

Summary

Combining past episodes of demand-driven high core inflation with current conditions, the Bank of Korea's issue analysis concludes that core inflation could remain in the mid-to-upper 2 percent range for a considerable time. In earlier episodes, stronger consumption backed by improved spending capacity coincided with easier pass-through of cost increases to prices. Price rises then spread quickly from a few items to many others. Today, as in those episodes, personal services such as travel, accommodation and restaurants are leading core inflation. The analysis therefore judges that both the breadth and the persistence of inflation are likely to increase.