South Korea may be nearing the end of its fight against inflation, as the rate of rising prices eased to the 2 percent target last month, backed by a retreat in the prices of international crude oil and farm produce, data showed Tuesday.

The Consumer Price Index, a key gauge of inflation, advanced 2 percent on-year last month, according to Statistics Korea. It was the lowest advance since 1.9 percent in March 2021.

CPI inflation, which remained at 1.9 percent in March 2021, reached its peak at 6.3 percent in July 2022. It dipped to 2.4 percent in July 2023, before rebounding and again inching down to the 2 percent range this year.

Prices rose 2.9 percent in April, 2.7 percent in May and 2.4 percent in June. Though inflation seemed to gain steam in July when it advanced to 2.6 percent, it dipped to 2 percent last month, reaching the target set by the Bank of Korea.

The 2 percent rise in August shows disinflation has been picking up pace here faster than the central bank’s estimate. The BOK projected price increases to fall to the low 2 percent range in August and come down to around 2 percent in September.

Stable prices of international crude oil backed the disinflation. Prices of petroleum products advanced 0.1 percent in August, displaying a sharp decline from the 8.4 percent on-year rise in July.

The price of agricultural, livestock and fishery products advanced by 2.4 percent in July, significantly lower than the 5.5 percent rise in July.

Core inflation, excluding the more volatile food and energy prices, advanced by 2.1 percent on-year, 0.1 percentage point lower than the previous month's 2.2 percent.

The government expects average inflation of 2.6 percent this year. The BOK’s forecast for this year is 2.5 percent.

“The stabilized prices of agricultural and petroleum products brought down the rise of the prices of daily necessities to 2.1 percent as well, the lowest in 13 months,” First Vice Finance Minister Kim Beom-seok said at a meeting held Tuesday. Daily necessities refer to 144 items closely related to people's everyday lives, such as food, clothing and housing.

“Without additional shocks such as climate change and volatility in international oil prices, consumer price growth will stay in the early 2 percent range.”

The government vowed to continue to bring down prices by expanding supply and providing discounts ahead of Chuseok, one of the biggest holidays in Korea, which falls in mid-September this year. Prices of agricultural products usually rise before the holiday due to high demand.

BOK Deputy Gov. Kim Woong echoed the view that prices will remain stable without further shocks.

“If there are no major supply shocks, consumer price growth will remain stable at the current level for some time,” Kim said at a separate meeting.

“Though high inflation pressured the public, prices have leveled off significantly with the progress in disinflation, compared to other major advanced countries,” Kim said.

In July, prices rose by 2.9 percent in the US and 2.6 percent in the eurozone.

Yet though the BOK has achieved its goal of price stabilization, the central bank is yet to loosen its grip on the base rate, having stressed the importance of maintaining financial stabilization through its monetary policy.

The BOK kept the base rate steady at 3.5 percent through a rate-setting meeting on Aug. 22, pointing out it will look into the timing of a rate cut by closely monitoring the rise of housing prices in Greater Seoul as well as household debt.