The undershoot on both headline and monthly CPI is likely to be read as giving the Bank of Korea some breathing room, even as the vice finance minister's comments on persistent upward pressures suggest policymakers are not treating the softer print as a green light to ease. The core CPI acceleration to its fastest pace in two and a half years is the more important signal for rate expectations, since it points to underlying price pressure building even as headline inflation cools on lower fuel costs. With the central bank having only just resumed hiking last month and flagged more to come, this data is unlikely to shift that trajectory, particularly given the ministry's own warning of a one-off inflation boost in August from mobile fee base effects.---South Korea's headline inflation cooled more than expected in July, but a jump in core prices and official warnings over lingering risks kept policymakers cautious.Summary:South Korea's CPI rose 2.8% year-on-year in July, below the Reuters poll forecast of 3.0% and down from 3.2% in June, marking a three-month low.On a monthly basis, CPI fell 0.2%, its first decline in eight months, against expectations for a 0.1% rise, driven by a 5.5% drop in petroleum product prices.Core CPI, which excludes volatile food and energy prices, rose 2.6% year-on-year, up from 2.5% in June and the fastest pace since December 2023.Vice Finance Minister Lee Hyoung-il said upward price pressures persist, citing uncertainty tied to the Middle East conflict.The finance ministry estimated nationwide fuel price caps reduced July inflation by 0.3 percentage points, and flagged a one-off 0.8 percentage point boost to August inflation from base effects tied to last year's temporary mobile fee discounts.The Bank of Korea raised interest rates last month for the first time in three and a half years and signalled further hikes are likely, citing inflation risks tied to brisk economic growth.South Korea's consumer inflation eased to a three-month low in July, coming in softer than markets had expected as falling oil prices weighed on the headline figure, even as policymakers cautioned that price pressures have not fully abated.The consumer price index rose 2.8% in July from a year earlier, down from 3.2% in June, according to data released by the Ministry of Data and Statistics on Tuesday. That outcome fell short of a median forecast of 3.0% from a Reuters poll of economists. On a monthly basis, the index declined 0.2%, its first fall in eight months, as petroleum product prices dropped 5.5%. Economists had expected a 0.1% monthly increase, matching the previous month's pace.Despite the softer headline number, officials signalled they remain watchful. Vice Finance Minister Lee Hyoung-il said upward price pressures, including uncertainty stemming from the conflict in the Middle East, continue to persist. The finance ministry also noted that nationwide fuel price caps had reduced July inflation by an estimated 0.3 percentage points, a measure that has helped keep headline price growth in check. Looking ahead, the ministry flagged that August inflation is likely to see a one-off boost of around 0.8 percentage points due to base effects from temporary mobile fee discounts introduced a year earlier, suggesting the current soft patch in headline inflation may not persist into the following month.The fall in oil prices that helped drive July's softer reading came after crude tumbled to three-week lows on Monday, following President Trump's decision to hold off on a fresh attack on Iran in the hope of securing a rapid deal that could boost supply from the Gulf.Underlying price pressures told a somewhat different story to the headline figure. Core CPI, which strips out volatile food and energy prices, rose 2.6% in July from a year earlier, accelerating from 2.5% in June and marking its biggest annual increase since December 2023. That acceleration is likely to keep the Bank of Korea attentive to inflation risks even as headline price growth cools. The central bank raised interest rates last month for the first time in three and a half years and signalled further increases could follow, as brisk growth in Asia's fourth-largest economy has continued to stoke concerns over inflationary pressure building beneath the surface. This article was written by Eamonn Sheridan at investinglive.com.