South Korean headline inflation likely to have remained subdued in March

South Korean inflation data for the month of March is set to release tomorrow. According to a DBS Bank research report, the consumer price inflation is likely to have remained weak and stable at 0.5 percent on a year-on-year basis. Owing to the fall in global commodity prices, the upstream producer prices dropped 0.2 percent in February, the first negative reading seen since November 2016.

Domestically-driven price pressures also remained weak, in the midst of the deceleration in GDP growth, fall in output gap and softness in the labor market. Even factoring in a moderate recovery in oil prices ahead, CPI figures will possibly only bottom out in the second quarter and remain in the range of 0.5-1.5 percent in the rest of 2019.

“Belowtarget inflation, together with disappointing growth data and the Fed’s extended rate pause, will likely stoke market expectations for a dovish BOK. But the probability of a rate cut this year remains far lower than 50%, in our view”, added DBS Bank.