SEOUL, Aug 4 (Reuters) – South Korea’s consumer inflation softened to a three-month low in July, coming in below market expectations on a fall in oil prices, though policymakers remained wary of upward price pressures.
The consumer price index (CPI) rose 2.8% in July from a year earlier, after rising 3.2% in June, data from the Ministry of Data and Statistics showed on Tuesday. That was weaker than a median 3.0% increase tipped in a Reuters poll of economists.
Over the month, the index fell for the first time in eight months, down 0.2%, as prices of petroleum products dropped 5.5%. Economists had expected a rise of 0.1%, the same pace as in the previous month.
“Upward price pressures, including uncertainty over the Middle East war, persist,” Vice Finance Minister Lee Hyoung-il said.
The finance ministry estimated that nationwide fuel price caps reduced inflation last month by 0.3 percentage points.
In August, there also will be a one-off factor raising inflation by 0.8 percentage points due to the base effects of temporary mobile fee discounts last year, according to the ministry.
Oil prices fell to three-week lows on Monday after U.S. President Donald Trump held off on a fresh attack on Iran in the hope of sealing a quick deal that could boost oil supplies from the Gulf.
The Bank of Korea raised interest rates last month for the first time in three-and-a-half years and flagged more to come, as brisk growth in Asia’s fourth-largest economy fanned inflation risks.
Core CPI, stripping off volatile food and energy prices, rose 2.6% in July from a year earlier, after rising 2.5% in June. It was the biggest rise since December 2023.
(Reporting by Jihoon Lee; Editing by Edmund Klamann and Sonali Paul)
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