South Korea Inflation Hits Near 2-Year High, Rate Hikes Likely

Seoul, May 6 - South Korea’s consumer prices surged to a near two-year high in April, fueled by rising oil prices amid Middle East tensions. The consumer price index (CPI) rose 2.6% year-on-year, up from 2.2% in March, the fastest pace since July 2024. Month-on-month, prices increased 0.5% as petroleum products jumped 7.9% and international airfares rose 13.5%.

Policy-sensitive three-year treasury bond yields soared to 3.675%, the highest since November 2023. The Bank of Korea (BOK) warned inflation will be higher in May, while Deputy Governor Ryoo Sang-dai indicated it is time to consider rate hikes. The BOK has held its policy rate at 2.50% since May 2025, after a series of cuts. Analysts expect the central bank to signal a policy change this month and deliver a rate hike at its July meeting.

Economists note that government fuel price caps introduced in March are helping to cap gasoline prices, but service inflation fueled by airfare increases remains a concern. The BOK’s next policy meeting is on May 28.