By Kwanwoo Jun


South Korea's headline inflation eased to below 3% in April but still remained stubbornly above the central bank's 2.0% target, highlighting the challenge of curbing price pressures.

The stickiness of inflation is likely to dial back market expectations for rate cuts this year and reinforce the bank's current stance of standing pat and not rushing to ease policy settings.

The benchmark consumer-price index rose 2.9% from a year earlier, compared with a 3.1% gain in March, the country's statistics office said on Thursday.

That was softer than the median forecast of a 3.1% rise for April from nine economists polled by The Wall Street Journal.

Compared with the prior month, the index remained unchanged in April--compared with the median forecast of a 0.1% increase. It gained 0.1% in March.

Core CPI, which strips out volatile food and energy prices, gained 0.2% from a month earlier and 2.3% from a year ago in April.

The inflation data come after the country's export growth accelerated in April following stronger-than-expected gross domestic product growth in the first quarter. That may ease concerns about soft domestic demand at the Bank of Korea.

"Instead, we believe these strong growth trends are likely to fuel both the hawks' argument that there is no rush to cut given above-trend growth and the neutral camp's argument to wait-and-see if supply side inflationary pressure reduces," Barclays economist Bum Ki Son said in a recent note.

Barclays expects the BOK to raise its 2024 growth and inflation forecasts, penciling in a rate cut in October.

The BOK said at its April policy meeting that 2024 GDP growth could be in line with or above its earlier forecast of 2.1%.

The central bank expects inflation to average 2.6% this year following 3.6% in 2023.

The bank held its base rate steady at a 15-year high of 3.50% for the 10th consecutive time in April. It maintains that inflation in South Korea is trending cooler though it remains sticky.


Write to Kwanwoo Jun at kwanwoo.jun@wsj.com


(END) Dow Jones Newswires

05-01-24 1929ET