SEOUL, March 6 (Reuters) - South Korea's consumer inflation for February hit its slowest pace in 10 months, bolstering views that the central bank is done with its current policy tightening cycle after it held rates steady last month.
Asia's fourth-biggest economy is teetering near the edge of a recession and policymakers will be wary of overtightening in the face of a slowdown in global growth and overseas demand for its major exports such as chips and consumer electronics.
The consumer price index rose 4.8% in February from a year before, Statistics Korea data showed on Monday, easing from January's 5.2%. It was below the 5.1% tipped in a Reuters poll, and was also the lowest rate since April 2022.
"It was encouraging that the rising pace of private service prices slowed, lowering the possibility of additional rate hikes by the central bank, at least on the domestic side," said Ahn Jae-kyun, a fixed-income analyst at Shinhan Securities.
Annual core inflation, which excludes volatile food and energy prices, inched down to 4.0%, from 4.1% a month before, and hit the lowest since August, suggesting easing underlying price pressure.
The Bank of Korea said in a statement after the CPI release that the February data came in as expected and that the inflation rate would fall significantly in March and continue easing this year, but still hold above its mid-term 2% target.
The BOK held interest rates steady last month, after a year of uninterrupted hikes, and said the monetary tightening campaign would not resume if inflation followed an expected path towards moderation.
Data out last week showed South Korea could be headed for a recession, with persistently weak exports and domestic retail sales, after a 0.4% contraction last quarter.
By product category, prices of livestock products fell 3.2% from the previous month and petroleum products slid 1.3%, dragging the inflation rate lower.
The inflation index rose 0.3% on a monthly basis, compared with 0.8% in the previous month and 0.5% expected by economists.
Finance Minister Choo Kyung-ho separately said that the inflation slowdown would become clearer in coming months, unless there were an external shock.
The South Korean three-year treasury bond futures rose as much as 0.24 points to 103.49 during the morning session, also helped by a fall in U.S. Treasury yields over the weekend.
