South Korea Inflation Accelerated to 26-Month High in May — Update

By Kwanwoo Jun

South Korea's headline inflation accelerated to a 26-month high in May, strengthening the case for the central bank to tighten policy in the coming months.

The increase reflected the growing effects of higher oil prices amid Middle East tensions and the won's weakness against the U.S. dollar, both of which continued to raise import costs.

The benchmark consumer-price index rose 3.1% from a year earlier in May--the fastest pace since March in 2024--after increasing 2.6% in April, the Ministry of Data and Statistics said on Tuesday. Petroleum products led the price growth. Prices of gasoline and diesel jumped 23% and 33%, respectively, from a year earlier in May.

The latest CPI reading was above the median forecast of nine economists in a Wall Street Journal poll tipping a 3.0% increase.

On a month-to-month basis, consumer prices rose 0.5% in May, faster than the poll's forecast of a 0.3% increase. Prices rose 0.5% in April from the previous month.

Core CPI, which excludes volatile food and energy prices, rose 2.5% from a year earlier and 0.5% from the previous month in May.

The Bank of Korea last week left interest rates unchanged at its first policy meeting under Gov. Shin Hyun-song but signaled a more hawkish stance, citing upside risks to growth and inflation.

Shin said rates may need to be raised "at an appropriate time in the future," while two of the seven central bank's board members dissented and voted for a rate increase at the May meeting.

The bank raised its growth forecast for Asia's fourth-largest economy to 2.6% for 2026 and 2.1% for 2027, from previous projections of 2.0% and 1.8%. It forecasts inflation will average 2.7% this year and 2.3% next year, compared with its earlier estimates of 2.2% and 2.0%.

Many economists expect the central bank to begin raising interest rates as early as July to contain inflationary pressures. They expect inflation to peak in the second half of 2026 before easing.

Write to Kwanwoo Jun at kwanwoo.jun@wsj.com

(END) Dow Jones Newswires

June 01, 2026 19:34 ET (23:34 GMT)