South Korea’s Inflation Moderates to Lowest in 21 Months

South Korea’s inflation moderated to a 21-month low in April, giving the central bank more leeway to hold off increasing interest rates.

Consumer prices increased 2.5 percent from a year earlier, after a 2.6 percent gain in March, Statistics Korea said today in Gwacheon, south of Seoul. The median estimate in a Bloomberg News survey of 13 economists was for a 2.8 percent gain. Prices were unchanged from March.

Asian nations should prepare to “shift gears” and tighten monetary policy as their economies strengthen and inflationary pressures rise, the International Monetary Fund said last week. The Bank of Korea reiterated in April that monetary policy will aim to stabilize consumer price gains at 3 percent over time.

“Consumer inflation may creep up due to higher gas prices and some public service fees,” Lee Sang Jae, a senior economist at Hyundai Securities Co. in Seoul, said before the release. “Still, inflation will likely stay around 3 percent well into the third quarter, helping policy makers delay rate hikes.”

The won strengthened 0.4 percent to close at 1,130.13 per dollar in Seoul yesterday, according to data compiled by Bloomberg. The Kospi Index gained 0.3 percent.

Core consumer prices, which exclude oil and agricultural products, advanced 1.8 percent in April from a year earlier, today’s report showed.

To contact the reporters on this story: Eunkyung Seo in Seoul at eseo3@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net