July Expected Inflation at 4.7% 'All-Time High'... Interest Rate Outlook Also at Record High

[Asia Economy Reporter Seo So-jeong] As the consumer price inflation rate reached the 6% level for the first time in 24 years, the expected inflation rate for the next year also surged by 0.8 percentage points in just one month. The interest rate level outlook index also hit an all-time high due to accelerated interest rate hikes in major countries.

According to the "July Consumer Sentiment Survey Results" released by the Bank of Korea on the 27th, this month's expected inflation rate rose by 0.8 percentage points from the previous month to 4.7%, marking the highest level since the related statistics began. The expected inflation rate has been on the rise for seven consecutive months since January (2.6%). After entering the 3% range in April (3.1%) and rising to 3.3% in May, it surged to nearly 5%.

Although the expected inflation rate exceeded 4% during past periods of rapid price increases in 2008 and 2011, it was lower than 4.7%. In particular, the 0.8 percentage point increase is the largest on record since the statistics began in 2008. The price perception index, which is an indicator of consumer price inflation judgment over the past year, also rose by 1.1 percentage points from the previous month, marking the largest increase ever.

Hwang Hee-jin, head of the Bank of Korea's Statistics Survey Team, explained, "This mainly stems from the unprecedented rise of the Consumer Price Index (CPI) in Korea to 6%," adding, "It seems that the judgment that prices will not significantly decrease in the second half of the year also played a role."

The interest rate level outlook index (152) also rose by 3 points from the previous month, breaking the all-time record. This index exceeds 100 when the number of people who expect interest rates to rise in six months is greater than those who expect a decline. The rapid pace of interest rate hikes in the U.S. and the anticipated additional increase in the domestic base rate are interpreted as reasons for reaching the highest level ever.

However, the housing price outlook index (82) plunged by 16 points in one month due to rising interest rates and sluggish housing transactions.

The Consumer Confidence Index (CCSI) also fell by 10.4 points from the previous month to 86.0, due to continued high inflation, accelerated global tightening, and concerns over economic slowdown in major countries.

Compared to June, all six indices that make up the CCSI (current living conditions, living conditions outlook, household income outlook, consumption expenditure outlook, current economic judgment, and future economic outlook) declined from the previous month.

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