South Korea inflation: an unexpected jump

SEOUL-- South Korea's inflation accelerated further to 3.7% y/y in November, its fastest pace since December 2011.

Higher oil prices were a key driver, with a reduction from the Government's decision to cut fuel taxes by 20% from November 12 slow to filter through. ANZ Bank says the impact of the fuel tax cuts should be clearer in December figures, but inflation is still expected to remain above the Bank of Korea's (BoK) 2% target over the next quarter or so.    

"Given the central bank's growing concerns about inflation, we think the odds are in favour of a front-loaded normalisation, with the next rate hike likely to materialise in February provided the economic recovery remains intact," ANZ says.

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