Because the excessive stage of the won-dollar change charge persists, main world funding banks (IBs) have consecutively raised their forecasts for Korea’s shopper value inflation charge subsequent 12 months. That is interpreted as reflecting expectations that the excessive change charge will influence costs with a time lag.
In keeping with the Korea Heart for Worldwide Finance on Dec. 4, the common forecast for Korea’s shopper value inflation charge subsequent 12 months by eight main IBs stood at 1.9% as of the top of final month. Whereas the common on the finish of October was 1.8%, it rose by 0.1 proportion level in only one month.
By particular person IBs, Barclays and Goldman Sachs raised their forecasts by 0.1 proportion level every from 1.8% to 1.9%, Citi from 1.7% to 1.8%, and JPMorgan from 1.3% to 1.4%. Nomura elevated its forecast from 1.9% to 2.1%. Financial institution of America (1.8%), HSBC (2.0%), and UBS (1.9%) maintained their present forecasts.
This 12 months’s annual inflation forecasts have been additionally adjusted upward. Korea’s shopper value inflation charge for this 12 months rose by 0.1 proportion level from a median of two.0% on the finish of October to 2.1% on the finish of November.
Particularly, 5 establishments together with Barclays, Citi, JPMorgan, Nomura, and UBS adjusted their forecasts from 2.0% to 2.1%, whereas Goldman Sachs raised its forecast by 0.1 proportion level from 1.9% to 2.0%. Financial institution of America maintained 1.9% and HSBC maintained 2.2%.
The establishments are analyzed to have adjusted inflation charges upward contemplating the scenario the place the won-dollar change charge is sustaining excessive ranges. When change charges rise, costs improve throughout petroleum merchandise, imported agricultural and fishery merchandise, processed meals, and eating out.
The influence of excessive change charges on costs is already changing into seen. In keeping with the November Shopper Worth Traits introduced by the Nationwide Knowledge Company, the patron value index rose 2.4% in comparison with a 12 months in the past, however petroleum merchandise jumped 5.9%, pushing up total costs by 0.23 proportion factors. This displays the influence of diminished gasoline tax cuts and excessive change charge elements, regardless of falling worldwide oil costs.
Agricultural and fishery merchandise additionally rose 5.6%, analyzed to have pushed up costs by 0.42 proportion factors. Accordingly, the price of residing index, which consists primarily of incessantly bought gadgets and might be considered as perceived inflation, rose 2.9%. This was the very best stage in 1 12 months and 4 months since July final 12 months (3.0%).
The Financial institution of Korea additionally raised its inflation forecast for this 12 months from 2.0% to 2.1% and subsequent 12 months from 1.9% to 2.1% respectively by its financial outlook on Nov. 27. Financial institution of Korea Governor Rhee Chang-yong acknowledged, “There are considerations about the potential of further value will increase resulting from excessive change charges.” Deputy Governor Kim Woong additionally mentioned in an inside assembly on Dec. 2, “We have to additional observe the influence that the elevated change charge could have on costs sooner or later.”
