Today's economic spotlight is due to South Korea's inflation which is predicted to continue to rise. However, what is unique is that Won is not affected. This means that Korea's economic fundamentals are still solid, so inflation can soon be overcome.

South Korea's inflation expectations kept rising for the second month in February. And this makes the expectation also kept growing for the second consecutive month. The concern is the hiking in public utility rates, at least based on the data released Tuesday.

Inflation expectations are measured based on the outlook from customers over inflation headlines for the last 12 months. From these data, the inflation stood at 4 per cent in February. 

This is about a 0.1% increase from last month, but official data from the Bank has yet to be. Meanwhile, this increased figure in the last two months was due to increased public utility rates, starting from electricity and natural gas.

Meanwhile, there is also an expected hike in general fees, inflation could hit a record high of 0f 4.7 per cent, and it is on the list of rapid interest rates.

South Korean Shares Close Little Changed and Monetary Policy Caution, Bank of Korea to Hold Rates Despite Inflation which is Still Very High

The Bank of Korea has tightened its monetary policy stance since August 2 last year. This composite of economic movements indicates that there is an export slump, which the global economic recession could cause.

So there is a possibility that higher public utility rates will occur. The Bank of Korea, at this moment, will hold its base interest rate in the range of 3.5 per cent, which applies for the rest of the year.

 It also suggests its long tightening cycle. The record is over despite still high inflation because the Bank of Korea is managing the shifting economy with difficulty.

"Domestic demand faces headwinds with burden services. Things are very impactful, starting from the property market and consumer sentiment. Expectations from this then create inflation to coverage toward the Bank of Korea's goal, which is to begin cutting rates.

"Until the end of the year, we expect inflation to cover the Bank of Korea's medium-term goal. This opens up the room for the Bank of Korea to start cutting rates. Persistence may be the main keyword, "

"The current risks are in our view, and if inflation results out to be more persistent than we predicted. This is a sign that the hawkish are starting to reprice the US fed policy trajectory," said Krystal Tan, an economist from ANZ observing the movement of Korea's economy.

The Bank o Korea has also raised around 300 basis points since last August, which is already very high. And this is also what might make South Korean shares close little changed, seeing the monetary policy caution. However, foreign net buyers remain crucial.

South Korea's Economic Fundamentals are Very Strong, the Chances of Inflation Are Very Small?

South Korean shares are in a pretty good area, with monetary policy events seeing weakness in the Won. Meanwhile, with the current economic conditions, this could be a sign that the fundamentals of the Bank of Korea are still solid for economic movement.

With the current conditions, South Korea must boast a solid economic base and post robust growth if the global economy gains traction. The World Bank CFO himself said about the strong fundamentals that the Korean Economy has so far.

It is predicted that Korean inflation will not stop even though there are signs that are emerging. The Bank of Korea is still waiting for traction from several private sectors. And this is also what then made Korean banks and economists predict that inflation would rise again.