Bank of Korea sees inflation holding near high-2% as October rate eases to 2.8%

The Bank of Korea said Tuesday that consumer price inflation eased to 2.8 percent in October from 2.9 percent the month before, a slowdown it attributed to lower prices for agricultural, livestock and fisheries products, while warning that inflation is likely to remain in the high-2 percent range.

"Consumer price inflation came in at 2.8 percent, slightly lower than the 2.9 percent of the previous month, as prices of agricultural, livestock and fisheries products fell," Lee Ji-ho, a deputy governor of the Bank of Korea, said at a meeting to review price conditions.

Core inflation held at 2.8 percent, with gains concentrated in durable goods and private services. Prices tracked for everyday living costs rose to 2.6 percent from 2.5 percent, driven partly by higher processed food prices.

The central bank said the overall slowdown was modest because private services and durable goods continued to climb at a firm pace. Cost pressures accumulated earlier have been passing through to travel and restaurant services and to electronics, it said, keeping core inflation elevated.

Oil product prices rose 14.9 percent from a year earlier, little changed from a 14.8 percent gain in September, as a cap on petroleum prices stayed in place even after international crude prices climbed on renewed Middle East tensions. Agricultural, livestock and fisheries prices fell 1.7 percent, steeper than the 0.3 percent decline a month earlier, as vegetables led the drop. Processed food prices rose 2.9 percent, quickening from 2.1 percent.

Looking ahead, the Bank of Korea said inflation would be affected by international oil prices but was expected to hold near the high-2 percent level given the strong upward trend in core prices.

"November consumer price inflation will be affected by movements in international oil prices, but considering the high pace of increase in core prices, it is expected to continue at the high-2 percent level," the Bank of Korea said.

The bank said it would keep a close watch on price conditions, citing lingering uncertainty over the Middle East situation as well as the pass-through of cost shocks and growing demand-side pressure.