S.Korea's inflation expectation falls to record low

Inflation expectations in South Korea fell to a record low despite the Bank of Korea (BOK)'s cut in interest rates, central bank data showed Thursday.

Inflation expectations among consumers over the next 12 months slid 0.1 percentage point from a month earlier to 2.5 percent in March, according to the BOK data. It was the lowest since the BOK began compiling the data in February 2002.

The lower inflation expectations indicate that consumers could delay consumption on expectations that consumer prices fall further, boosting concerns over deflation, or economic slowdown and low headline inflation.

The BOK lowered the benchmark interest rate from 2.5 percent to an all-time low of 1.75 percent in the past year, but inflation expectations declined from 2.8 percent to 2.5 percent in the same period.

It fueled worries that the BOK's rate cut may not work to stimulate the aggregate demand of the economy. Japan suffered from deflation for about two decades despite the near-zero policy rate.

Some said the weak domestic demand should be propped up by a narrower inequality between the rich and the poor through various policy tools such as a minimum wage hike.

Consumer confidence turned downward. Composite consumer sentiment index (CCSI), which reflects consumers' assessment of economic conditions, was 101 in March, down 2 points from a month earlier.

Sub-indices showed mixed picture. Sentiment on current economic conditions slid 1 point in March from a month earlier, with the reading for prospective economic situations rising 1 point.

Consumer sentiment on prospective income declined 3 points on- month in March, and the figure for prospective consumption also dipped 3 points. Endi