US and South Korean inflation and monetary policy trends

Economic indicators in the United States and South Korea have influenced global market expectations regarding monetary policy. Initial forecasts suggested a potential easing of inflationary pressures in the U.S., with the July core Consumer Price Index projected to reach its lowest annual increase since February due to stabilizing energy prices.

Following the release of U.S. consumer price data, which showed a 0.1% rise in July, Asian stock markets experienced gains. The Kospi in South Korea led these increases as the data reduced the perceived likelihood of further interest rate hikes by the Federal Reserve. Market tools indicated the probability of a September rate hike dropped from 54% to 40% following the report.

More recently, Asian stock markets have trended toward their strongest weekly performance in two months, driven by benign U.S. inflation data that continues to lower expectations for imminent Federal Reserve interest rate hikes. In South Korea, the KOSPI surged, supported by strong performance in semiconductor stocks such as Samsung Electronics and SK Hynix. Japan’s Nikkei 225 also saw substantial increases, fueled by investor demand for artificial intelligence and technology-related equities.

While the broader Asia-Pacific region has trended toward its strongest weekly performance in months, results in Hong Kong and mainland China have been more mixed. Geopolitical tensions in the Middle East, specifically regarding Iran and the Strait of Hormuz, remain a primary risk factor that could impact oil prices and revive inflation concerns. Despite these uncertainties, investors have largely focused on the AI theme and the shifting global monetary policy outlook.