Seoul: South Korea’s inflation slowed more than expected in an indication authorities are making progress in their campaign to cool price growth.

Consumer prices advanced 2.9% in April from a year earlier, decelerating from 3.1% in March, the the country’s statistics office reported yesterday.

Economists surveyed by Bloomberg had forecast the pace of price growth would slow to 3%. Prices excluding food and energy increased 2.3%, matching forecasts.

The indication of cooling inflation may put the central bank on the path toward considering a policy pivot at some point later in the year, but isn’t likely to prompt any major shift when the board gathers later this month.

Policymakers have refrained from signalling any inclination to loosen policy settings as they await clearer signs that inflationary pressure will cool toward the bank’s target toward the end of this year.

Agricultural goods have led the gains in inflation so far in 2024, while Middle East tensions continue to spur concerns about energy costs.

Home purchases are growing in Seoul, driving a price recovery and a resurgence in household-debt levels that authorities have pledged to tame.

Meanwhile, debt risks associated with the property market are keeping policy makers on edge.

Delinquency rates among institutions exposed to the real estate market are on the rise, and developers with financial trouble face restructuring risks that could increase pressure on credit markets.

Last month, the central bank held its key rate at 3.5% for a 10th consecutive time, pledging to keep its focus on fighting inflation.

In minutes from that board meeting, members acknowledged risks from both inflation and financial imbalances and vowed to keep an eye on markets.

South Korea’s economic performance adds to the case for the Bank of Korea (BoK) to keep its policy restrictive for longer.

The economy grew more than twice as fast as expected in the first quarter largely thanks to export growth and a rebound in construction investment.

South Korea’s consumer spending also remains resilient with increasing inflows of Chinese tourists shoring up retailers in recent months.

Another factor keeping the BoK from embarking on a policy pivot is the decreasing likelihood of a near-term rate cut in the United States.

US Federal Reserve chair Jerome Powell said Wednesday that inflation data have not yet instilled confidence that rate cuts would be appropriate.

The US reluctance to lower borrowing costs has hurt the South Korean won, one of the worst-performing currencies in Asia this year.

South Korean policymakers are concerned the weakening of the currency could exacerbate price pressures in a country heavily reliant on imports of food and energy.

Data released by Statistics Korea showed transportation costs rose 2.9% from a year earlier last month, matching the headline inflation.

Utility charges rose 1.8%. Prices of food and non-alcoholic beverages rose 5.9% while those of clothes and shoes increased 5.3%.

Prices for household services and products rose 2.4%.

 - Bloomberg