Soaring Expected Inflation Hits Record High of 4.7% (Comprehensive)

BOK, July Rate Surges Another 0.8 Percentage Points
Interest Rate Forecast Rises 3 Points to Record High
Housing Price Outlook Index Hits All-Time Low

[Asia Economy Reporter Seo So-jeong] As the consumer price inflation rate entered the 6% range for the first time in 24 years, the expected inflation rate (the anticipated consumer price inflation rate for the next year) surged by 0.8 percentage points in just one month, reaching an all-time high. On the other hand, the housing price outlook index fell to an all-time low due to the impact of rising interest rates and other factors.

According to the "July Consumer Sentiment Survey Results" released by the Bank of Korea on the 27th, the expected inflation rate this month rose by 0.8 percentage points from the previous month to 4.7%, marking the highest level since related statistics began in 2008. 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 3.9% in June, it soared to nearly 5% this month.

Although the expected inflation rate had previously risen to 4.6% and 4.3% in 2008 and 2011, respectively, during past periods of rapid price increases, these levels were lower than this month’s figure. Notably, the 0.8 percentage point increase is the largest on record since the related statistics began in 2008. The inflation perception index, which reflects judgments on consumer price inflation over the past year, also rose sharply by 1.1 percentage points from the previous month to 5.1%, marking the largest increase ever recorded.

Hwang Hee-jin, head of the Bank of Korea’s Statistics Survey Team, explained, "As Korea’s Consumer Price Index (CPI) has risen unprecedentedly to 6%, the expected inflation rate has increased," adding, "It seems that the judgment that prices will not significantly decrease in the second half of the year has influenced this."

The interest rate level outlook index (152) also rose by 3 points from the previous month, breaking the record. This index exceeds 100 when more people expect interest rates to rise in six months than those who expect them to fall. The rapid pace of interest rate hikes in the U.S. and the anticipated additional increase in Korea’s base interest rate are interpreted as reasons for reaching the highest level ever.

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

The Consumer Confidence Index (CCSI) also fell by 10.4 points from the previous month to 86.0, amid ongoing 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. However, the impact of the Bank of Korea’s Monetary Policy Committee’s "big step" (a 0.5 percentage point increase in the base interest rate) on the 13th was not reflected in this survey.

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