Food and oil prices likely to increase South Korea's headline inflation

South Korea expects a modest rise in fresh food prices due to drought, which actually means a significant pick-up in seasonally adjusted prices given the well-established pattern of a sizeable decline in fresh food prices in June. Therefore, Societe Generale estimates headline inflation to have picked up from 0.5% to 1.0% yoy and from 0.3% to 0.4% mom in June. The pace of rebound in oil prices is likely to have accelerated a bit due to a moderate rise in both crude oil prices and the USD/KRW exchange rate. 

According to SocGen, "Core inflation is expected to be stable at 2.2% yoy and 0.2% mom, driven by  the core manufacturing sector and housing rents. Headline inflation is likely to rise further in H2 this year as base effects from oil prices kick in, while core inflation should be stable around the current level until the end of this year".