September 25, 2019 / 9:09 PM / 2 months ago

South Korea inflation expectations fall, raise chance of rate cut

FILE PHOTO: A saleswoman reads a newspaper as she waits for customers in front of hair products at a supermarket in Seoul April 27, 2011. REUTERS/Truth Leem

SEOUL (Reuters) - South Korean consumers’ inflation expectations fell to the lowest on record, a survey from the Bank of Korea (BOK) showed on Thursday, bolstering the chances for another rate cut in October.

Consumers’ median inflation expectations for the next 12 months fell to 1.8% in September, down from 2.0% in August and the lowest since the data was first released in February 2002.

The nation’s consumer price index was unchanged in August from a year earlier, the weakest pace since the country began releasing inflation data in 1965 and far below the central bank’s 2% target and annual forecast of 0.7%.

The composite consumer sentiment index, compiled from the same survey, edged up to 96.9 in September from 92.5 in August.

“The index sharply rebounded after falling for four months in a row as concerns over U.S.-China trade tensions eased (earlier this month),” a central bank official told reporters on Wednesday, but added that future trends will likely depend on how global events develop such as the Sino-U.S. trade war.

The composite reading stands below 100, meaning that consumer sentiment is weaker than the long-term average, which currently covers 2003-2018.

The official also said the impact from the recent outbreak of African swine fever in South Korea is not reflected in the data yet. The first case was reported on Sept. 17 while the survey was carried out from Sept. 10 to 17.

The BOK is widely expected to lower rates at its next meeting on Oct. 16, after holding fire at its last meeting in August. The central bank surprised markets with a cut in July, the first reduction in three years.

S&P Global Ratings chief economist Shaun Roache told Reuters on Tuesday that deflation pressure was the biggest domestic risk facing South Korea’s economy, adding that he expected two more rate cuts by early next year.

Reporting by Joori Roh; Editing by Jacqueline Wong

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