South Korea's 1.50% inflation rate falls short of target

Sluggish employment is experienced in the country.

Inflation rate in South Korea stood still at 1.50% for the past months which comes short to the 2% target. Because of this, the central bank will maintain its accommodative monetary policy stance in the second half of 2018, Bank of Korea (BOK) governor Lee Ju-yeol revealed.

In January, the inflation rate is at 1% which is the lowest figure in the past 17 months.

“It is judged that the Korean economy is sustaining its solid growth, as consumption and exports continue their favourable movements even though construction and facilities investments are going through adjustments,” Lee said during the 68th anniversary of the central bank.

However, Lee identified sluggish employment due to delayed improvements in business conditions in some industries as well as the dual labour market as one structural problem in the country’s economy. He also mentioned that household debt grows faster than household income which limits consumption through increases in borrowers’ debt repayment burdens. 

“But going forward, the domestic economy is expected to grow at a pace that does not diverge greatly from the path forecast in April,” the governor said.

According to Lee, the country’s consumption and exports continue favourable progress despite adjustments in construction and facilities investments.

The governor believes that whilst Korea will not be affected by the “financial unrest” in some neighbouring countries, the central bank should be more careful in examining the effects from uncertainties brought by changes from monetary policy normalizations as well as protectionism in some major countries.