South Korea's headline inflation rate in July dipped from the 30-month peak recorded in June, partly due to government measures that capped fuel and electricity costs.

However, underlying price pressures remain persistent, with inflation still exceeding the central bank's 2% target.

According to Statistics Korea on Tuesday, the benchmark Consumer Price Index (CPI) rose 2.8% in July year-on-year, a deceleration from June's 3.2% increase, which had been the fastest since December 2023.

This reading fell below the median forecast of 2.9% from a survey of 11 economists.

On a monthly basis, consumer prices declined by 0.2% in July, compared with the survey's expectation of a 0.1% drop. In June, prices had edged up 0.1% month-on-month.

Core CPI, which strips out volatile food and energy items, climbed 2.6% in July from a year ago and rose 0.4% from the previous month.

The increase in oil product prices moderated as the government imposed caps on retail fuel prices and took steps to lower electricity tariffs to curb inflation.

In July, gasoline and diesel prices surged 13% and 22% year-on-year, respectively, a slower pace compared to June's increases of 23% and 34%. Sequentially, both fuels fell 6.2% and 6.7%.

Earlier in July, the Bank of Korea raised interest rates for the first time in over three years, joining other central banks in tightening policy, in response to inflation pressures exacerbated by soaring oil prices due to the prolonged Middle East conflict.