South Korea’s annual inflation accelerated to a two-and-a-half-year high in June, reinforcing expectations that the Bank of Korea could raise interest rates as soon as its next policy meeting later this month.
Consumer prices rose 3.2% year-on-year in June, up from 3.1% in May and marking the fastest pace of inflation since December 2023, according to the Ministry of Data and Statistics. The reading matched market expectations in a Reuters poll.
On a monthly basis, the consumer price index edged up 0.1%, also in line with economists’ forecasts.
The latest rise in inflation was largely driven by higher global oil prices amid continued geopolitical tensions in the Middle East. A weaker South Korean won also added to price pressures by increasing the cost of imported raw materials and other inputs.
The stronger-than-expected inflation backdrop has strengthened market expectations that the Bank of Korea will resume monetary tightening, with investors increasingly looking towards its next policy meeting on 16 July.
At the central bank’s previous meeting on 28 May, five of the seven monetary policy board members voted to keep the benchmark interest rate unchanged at 2.50%, while two members supported a 25-basis-point increase.
A Reuters survey conducted in May also found that around two-thirds of economists expected at least one interest rate hike by the end of September.
