South Korea's headline consumer price index (CPI) rose 2% on year in January, easing from the 2.3% on-year rate logged in December, and also hitting the inflation target of the Bank of Korea, the central bank reported Tuesday.
South Korea's core CPI, which strips out certain food and energy bills, also rose 2% on year in January, but the rate was unchanged from December, added the Bank of Korea.
The Bank of Korea, like many other central banks, targets a 2% annual rise in the nation's CPI.
Food and beverage prices still pushed South Korea CPI up in January, rising by 2.9% on year, while restaurants and hotel charges gained by 2.8% in the same time frame, according to officials.
In modest contrast, communication prices rose a mild 0.4% on year in January, while housing and utility charges rose 1.3% on year.
Despite the nation's cooling CPI, the Bank of Korea is not likely ease monetary policy any time soon, due to foreign-exchange markets and stretched Seoul house prices, said ING Think, an arm of the Dutch investment house.
"Looking ahead, headline inflation is expected to temporarily decline below 2%. The slowdown, however, is not anticipated to prompt the Bank of Korea to resume rate cuts," advised ING Think.
South Korea's central bank is presently concerned with "FX volatility and financial instability related to Seoul housing prices," said ING Think.
The Bank of Korea wants to cool off Seoul's housing market, and also firm the exchange rate of the won, the nation's currency, said ING Think.
With the South Korean economy expected to expand in 2026, the Bank of Korea will likely stand still on monetary policy, due to concerns about overheated Korean property markets and FX rates.
"Growth conditions are expected to improve in the current quarter, driven by robust AI demand and strong price action in memory chips. We believe that the BoK's easing cycle has ended and the policy rate will stay at 2.5% for an extended period," said ING Think.
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