South Korea Inflation Strongest Since 1998

South Korea's consumer price inflation increased in June at the fastest pace since 1998, adding pressure on the central bank to tighten its policy further, official data showed on Tuesday.

The consumer price index gained 6.0 percent year-on-year in June, following a 5.4 percent increase in May, Statistics Korea reported.

This was the biggest growth since November 1998 and exceeded the expected rate of 5.9 percent.

Excluding food and energy, core consumer prices advanced 3.9 percent annually in June, following a 3.4 percent rise in the preceding month.

On a monthly basis, overall consumer prices rose 0.6 percent in June, after a 0.7 percent increase in the previous month. Prices were expected to climb 0.5 percent.

The core CPI increased 0.4 percent monthly in June, after a 0.5 percent growth in the prior month.

Based on recently released data, the Bank of Korea is likely to deliver a 50 basis point hike in July, and then to revert to 25 basis point hikes in August and October, Min Joo Kang, an ING economist said. A total of 100 basis points of increases could stabilize inflation by the year-end.

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