South Korea Inflation Surges to Two-Year High, July Rate Hike Expected

South Korea’s consumer inflation accelerated in May to a more than two-year high, driven by surging oil prices from the Middle East conflict. The consumer price index (CPI) rose 3.1% year-over-year, surpassing the 3.0% forecast, and marking the biggest jump since March 2024.

Prices for petroleum products rose 24.2%, and international airfares jumped 33.5% compared to a year earlier.

The Bank of Korea signaled an imminent shift toward tighter policy to curb inflation and support the won. The central bank has raised its inflation forecast for this year to 2.7%, up from 2.2%. The next policy meeting is July 16.

Economists widely expect a rate hike in July, though the trajectory for the rest of the year will depend on the evolving conflict in Iran and its impact on global oil prices.