S. Korea Inflation Moderates to 14-Month Low, Within Target

South Korea’s inflation moderated to a 14-month low in February and within the central bank’s target range, bolstering the case for the central bank to keep borrowing costs unchanged next week.

Consumer prices rose 3.1 percent from a year earlier, matching the median estimate of 16 economists in a Bloomberg News survey and following a 3.4 percent gain in January, Statistics Korea said today in Gwacheon, south of Seoul. Prices rose 0.4 percent from January.

South Korean inflation may accelerate above the government’s forecast of 3.2 percent this year on higher oil prices just as the nation’s economic growth is about to improve, Finance Minister Bahk Jae Wan said last week. The Bank of Korea will hold interest rates next week for a ninth month, all six economists forecast in a Bloomberg survey.

“The BOK remains concerned about core inflation and inflation expectations, taking little comfort in the roll-down of headline inflation given the favorable base,” Wai Ho Leong, a senior regional economist at Barclays Capital in Singapore, said before the release.

Leong said he felt more comfortable with his forecast of no policy rate change this year as U.S. housing and labor market indicators have been surprising to the upside, which will pass through into activity from February onwards in Asia.

The benchmark Kospi stock index gained 1.3 percent on Feb. 29. Domestic financial markets were closed for a holiday yesterday.

Core prices, which exclude energy and food costs, advanced 2.5 percent in February from a year earlier, today’s report showed.

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