In the aftermath of the Middle East conflict, soaring prices appeared to ease last month, but beneath the surface, more persistent inflationary pressure is lurking. While the July consumer price inflation rate dropped to the 2% range for the first time in three months, the core inflation rate, a key price indicator, posted its largest increase in two years and seven months, leaving no room for complacency.

According to the 'July Consumer Price Trends' announced by the National Data Agency today (4th), last month's consumer price inflation rate stood at 2.8%. This marks a return to the 2% range for the first time in three months, following two consecutive months in the 3% range (May 3.1%, June 3.2%). The consumer price index rose 2.8% year-over-year to 119.77 (2020=100).

The key factor behind the shift to price stability was the slowdown in the rate of increase in oil prices, which had surged due to the Middle East conflict. In July, oil prices rose 15.5%, significantly narrowing the increase from June (24.7%). By item, diesel rose 21.5% (33.7% in June) and gasoline rose 12.6% (23.1% in June). As a result, the contribution to inflation from oil products shrank to 0.60 percentage points (p) from 0.93%p in June.

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The Ministry of Economy and Finance estimated that the government's oil price ceiling policy lowered the July consumer price inflation rate by 0.3%p. Without the price ceiling policy, July inflation would have reached 3.1%, according to the analysis. In this way, the government's policy intervention also contributed to lowering the overall inflation rate.

However, contrary to the surface-level price stability, more powerful inflationary pressure is being detected underneath. Core inflation, excluding food and energy, rose 2.6%, marking the largest increase in two years and seven months since December 2023 (2.8%). This suggests that broad demand pressure and structural factors such as service charges continue to exert strong upward pressure on prices. The cost of living index, focusing on frequently purchased items, also rose 2.5%, while the fresh food index declined 2.3%.

While the inflation rate has dropped to the 2% range and appears to approach the authorities' target, the steep rise in core inflation remains a source of concern. Although oil price stabilization and government policy appear to provide temporary relief to inflation, the notable surge in core inflation is expected to pose greater challenges for future price management. Experts point out the need to conduct a more thorough analysis of the complex price situation rather than relying on simple surface-level figures, and to continuously prepare preemptive countermeasures.