South Korea’s inflation in October eased after hovering above 2 percent since July as runaway fresh food prices during the last unusually hot and rainy summer normalized.

According to data released by Statistics Korea Wednesday, the nation’s consumer price index (CPI) gained 1.8 percent in October from the previous year, the smallest annualized gain since December last year. It hovered around 2 percent throughout this year, and shot up to 2.6 percent in August due to sharp gain in fresh food prices amid poor weather conditions.

With the inflation moving closer to the central bank’s full-year target of 1.9 percent, the Bank of Korea has more room to ready a lift-off in the key interest rate kept unchanged at the record-low of 1.25 percent since June last year. The market has been betting a rate hike at this year’s last monetary policy meeting on Nov. 30 as the economy grew by a faster-than-expected pace of 1.4 percent in the third quarter and is more likely meet this year’s full-year annualized growth target of 3.0 percent. The rises have spread to the longer curve, sending the 10-year government bond yield to this year’s high.

Prices of agricultural, livestock and fishery products rose 3.0 percent on year, sharply easing from gains of 12.2 percent in August and 4.8 percent in September. Vegetables price that skyrocketed 22.5 percent in August fell 9.7 percent on year and pulled the headline CPI down by 0.18 percentage point. The on-year fall in vegetable price is the biggest since October 2014.

Utility prices dropped 1.6 percent from a year earlier and dragged down the headline inflation by 0.06 percentage point on reduced electricity bills.

Petroleum-related prices shot up 8.2 percent due to a rise in global oil prices and pushed up the headline inflation by 0.35 percentage point.

Service charges including rent prices and personal and public service charges rose 2.0 percent, driving up the headline inflation by 1.11 percentage points.

The living necessaries index including rent was up 2.0 percent from the previous year to mark the lowest on-year gain since December last year.

“Prices of cabbage and radish fell due to increased harvest volume and brought down overall vegetable prices,” said Kim Yoon-sung from the statistics bureau. But it is too early to say that prices are back to normal as there is the uncertainty on the supply-end from volatile global oil prices. The headline index could further go down as city gas bills would be shaved by 8.7 percent in November.

By Cho Si-young and Cho Jeehyun

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]