Bank of Korea expects inflation to rebound to around 2% in September

Bank of Korea expects inflation to rebound to around 2% in September

The Bank of Korea (BOK) has indicated that it expects inflation to rebound to around 2% in September, following a slowdown in consumer price growth during August. The central bank cited a one-time drop in communications costs as the primary factor behind the recent cooling of inflation rates.

In August, consumer prices in South Korea rose by 1.7% year-over-year, marking a slowdown from the 2.1% increase recorded in July. The decrease was primarily attributed to a significant drop in communications costs, which were affected by a data breach that led to a reduction in mobile bills for millions of subscribers. The BOK's governor, Rhee Chang Yong, noted that this temporary impact would likely fade in September, potentially setting the stage for a rebound in overall price growth [1].

The BOK's decision to maintain its policy rate at 2.5% reflects its cautious approach to monetary policy, given the ongoing challenges posed by the U.S. tariffs and the overheating housing market. The central bank has expressed concern over potential risks from rising household debt and soaring housing prices, particularly in the Greater Seoul area. Despite the recent slowdown in inflation, the BOK has warned that these risks could weigh heavily on the broader economy [2].

The central bank has raised its 2025 growth forecast to 0.9% and its inflation outlook to 2.0%, indicating its expectation that the economy will continue to face headwinds from U.S. trade policies and other external factors. However, the recent data on consumer inflation has given the BOK more room to consider resuming its monetary easing cycle at its next policy meeting in October [3].

In conclusion, while the BOK's expectation of a rebound in inflation to around 2% in September provides a measure of relief, the central bank remains cautious about the longer-term outlook for the economy. The ongoing challenges posed by U.S. tariffs and the housing market will continue to shape monetary policy decisions in the coming months.

References:
[1] https://www.cryptopolitan.com/south-koreas-exports-hold-steady/
[2] https://investinglive.com/news/us-tariffs-hit-south-korea-exports-in-august-growth-slows-sharply-to-13-20250901/
[3] https://www.bloomberg.com/news/articles/2025-09-01/s-korea-s-inflation-eases-giving-bok-more-room-to-resume-cuts