The Bank of Korea: "June Inflation Rate Higher Than May... Annual Rate May Exceed 2008 Level"

Report on the Operation Status of the Inflation Stabilization Target

[Asia Economy Reporter Seo So-jeong] The Bank of Korea forecasted that consumer prices will continue to rise sharply above 5% for the time being due to the impact of rising international commodity prices. The consumer price inflation rate in June is expected not only to surpass that of May (5.4%) but also to possibly exceed the annual inflation rate of 2008 (4.7%), a period of past price surges.

On the 21st, the Bank of Korea released this inflation outlook in its "Price Stability Target Operation Status Review Report." The Bank stated, "The consumer price inflation rate in June is expected to be higher than in May as the price increases of petroleum products, processed foods, and dining out expand," adding, "In the second half of the year, the upward pressure is expected to intensify compared to the first half due to continued overseas supply factors centered on crude oil and grains."

Since October last year, the consumer price inflation rate had been in the 3% range, but it exceeded 4% in March and reached 5.4% last month, the highest in 13 years and 9 months since August 2008 (5.6%).

The Bank of Korea also expects the core inflation rate (excluding food and energy) to maintain a significant upward trend in the 3% range for a considerable period. With the lifting of social distancing measures leading to a rapid rebound in service consumption and increased demand pressure, inflationary pressures due to global supply chain disruptions are also expected to persist for the time being.

In particular, considering the expanding upward trend in international oil prices, the Bank anticipates that future inflation trends will exceed the forecast path made in May. The Bank raised its inflation forecast for this year from 3.1% to 4.5% in one go, marking the highest level in 13 years and 10 months since the 4.8% forecast in July 2008.

However, the prolonged Ukraine crisis causing sustained high international commodity prices, deepening global supply disruptions, and expanding consumption recovery following the lifting of social distancing measures act as upward risks, prompting the Bank to raise its inflation outlook once again. On a quarterly basis, the inflation rate is also expected to exceed 5% for the first time since the third quarter of 2008 (5.5%).

The Bank of Korea stated, "The current consumer price inflation trend is very similar to the first half of 2008, but considering recent inflation conditions, there is a high possibility that the high inflation trend will continue into the second half of the year," adding, "It is also not possible to rule out the possibility that this year's annual consumer price inflation rate will exceed the 2008 level (4.7%)."

This content was produced with the assistance of AI translation services.