Bank of Korea: "Inflation May Rise Further in May... Closely Monitoring the Impact of Oil Price Shocks"

In April, the consumer price inflation rate rose by 2.6% month-on-month, despite a decline in agricultural, livestock, and fishery product prices. The Bank of Korea has forecast that the rate of increase could be even greater this month.

Seongdae Yoo, Deputy Governor of the Bank of Korea. Photo by Yonhap News

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On the morning of May 6, Usangdae, Deputy Governor of the Bank of Korea, held a "Price Situation Review Meeting" at the Bank's main building to assess recent inflation trends and the future outlook.

Consumer prices in April rose by 2.6%, a significant increase from the previous month's 2.2%. Agricultural, livestock, and fishery product prices continued their downward trend, falling 0.5% year-on-year, mainly due to increased shipments of key agricultural products. However, this was offset by a sharp expansion in petroleum product prices. While petroleum product prices had fallen 2.4% year-on-year as of February, they rose by 9.9% in March and surged further to 21.9% in April. The Bank of Korea noted that government measures such as the petroleum price ceiling and fuel tax cuts helped to cushion the impact of rising oil prices to a significant extent.

The core inflation rate remained at 2.2% in April, the same as the previous month, as the rise in public services, such as international airfares, was offset by a narrower increase in core goods prices.

Deputy Governor Usangdae stated, "In April, the sharp rise in international oil prices led to a significant increase in petroleum product prices, resulting in a much higher inflation rate compared to the previous month. For May, inflation could rise further, as petroleum product prices remain high and the base effect from agricultural, livestock, and fishery product prices comes into play." In May last year, agricultural, livestock, and fishery product prices fell by 2.6% from the previous month, a much larger drop than the average decrease of -0.5% from 2011 to 2024.

However, Deputy Governor Usangdae added, "Recently, food prices have remained stable, and government price stabilization measures are also expected to alleviate the upward pressure from oil price shocks. Given the high degree of uncertainty regarding the future inflation path, including developments in the Middle East, oil price trends, and the potential spillover to non-petroleum items, we will continue to monitor the situation closely and with vigilance."

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