Bond Expert 53% "Inflation Rate to Slow Down Next Month"

Early End to US Tapering and Rate Hikes
Inflation Expected to Stabilize, Easing Rise Concerns

In the third quarter of this year, domestic food prices in Korea rose by 5.0% compared to the same period last year, marking the fourth highest increase among OECD member countries. According to Statistics Korea and the OECD on the 5th, Korea's food and non-alcoholic beverage prices in the third quarter (July to September) increased by 5.0% compared to the same period last year. Although the prices of agricultural, livestock, and fishery products, collectively known as food prices, stabilized in October, slowing the increase to 1.6%, both agricultural, livestock, and fishery products and processed food prices surged again in November, rising to 6.1%. The photo shows a large supermarket in downtown Seoul on the 5th. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Junho Hwang] A forecast has emerged that the inflation rate will slow down in January next year. Although prices are soaring due to inflation concerns and rising raw material costs, it is analyzed that expectations have grown that the inflation rate will somewhat decrease due to the early end of tapering and interest rate hikes in the United States.

According to the results of the ‘January Next Year Consumer Price-Related Bond Market Indicator (BMSI)’ survey by the Korea Financial Investment Association on the 28th, 53% of bond market participants expected prices to remain stable next month. This is a significant increase from 40% last month. In last month’s survey, 56% predicted that prices would rise this month. This indicates a relief in inflation concerns.

However, since 34% still expect ‘price increases,’ it is anticipated that rather than a sudden change in the inflation trend, the slope of the rising curve will become somewhat gentler. Respondents choosing ‘price decrease’ also increased from 4% last month to 13% this month.

The change in inflation outlook reflects external factors such as the acceleration of the U.S. tightening pace and resolution of uncertainties more than internal factors like changes in domestic consumer sentiment due to social distancing. Most respondents chose price stability citing "the global persistence of inflation concerns and expectations for the early end of U.S. tapering and interest rate hikes in response." Accordingly, the overall inflation BMSI rose from 48.0 points this month to 79.0 points. This index indicates market improvement as it approaches 100.

Concerns about rising interest rates (71.0 points) also decreased similarly to inflation. The percentage of respondents expecting ‘interest rate increases’ dropped from 52% last month to 40%, while those choosing stability increased from 35% to 49%. Respondents cited "the resolution of uncertainties due to the Bank of Korea’s interest rate hikes" as the reason for choosing stability. On the other hand, regarding exchange rates, the BMSI was 74.0 points due to "ongoing domestic and international uncertainties such as concerns over delayed global economic recovery caused by COVID-19 variants and continued U.S.-China conflicts." Respondents expecting ‘exchange rate increases’ rose from 30% to 37%. Reflecting these forecasts, the comprehensive BMSI, which considers inflation, interest rates, and exchange rates collectively, rose to 87.9 (previous month 80.2).

Meanwhile, this survey was conducted with 200 bond issuance, management, brokerage, and analysis professionals from 95 institutions, resulting in 100 responses.

This content was produced with the assistance of AI translation services.