Bank of Korea says July inflation slows to 2.8 percent

The Bank of Korea said Tuesday that July consumer-price inflation slowed to 2.8 percent from 3.2 percent a month earlier, as price gains for petroleum products and agricultural, livestock and fisheries goods eased.

Petroleum-product inflation slowed to 15.5 percent year on year in July from 24.7 percent in June. Annual price growth for agricultural, livestock and fisheries goods eased to 0.9 percent from 3.2 percent. Living-cost inflation, which is heavily weighted toward those categories, fell to 2.5 percent from 3.4 percent. Core inflation, which excludes food and energy, rose to 2.6 percent year on year from 2.5 percent in June. Travel-related service prices, including airfares and travel costs, remained high, while price gains for durable goods such as information-technology devices and electric vehicles widened.

Consumer-price inflation in August is expected to be higher than July because large mobile-communications fee discounts offered by some operators last year will create a base effect, Senior Deputy Governor Lee Ji-ho said. Looking beyond August, the bank sees upside risks from uncertainty surrounding the Middle East war, cost-shock pass-through and greater demand-side pressure. Government price-stabilization measures could work in the other direction. "We will monitor price conditions with vigilance," Lee said.

In its July economic assessment, the bank said growth was expected to expand on strong semiconductor conditions and their spillover effects. It said improving economic conditions could add to demand-side pressure on prices.