Bank of Korea Vows Proactive Efforts to Tame Inflation

SEOUL, June 17 (Yonhap) -- The Bank of Korea (BOK) will make proactive efforts to tame inflation until it is convinced that inflation is clearly heading toward its target level, its governor said Wednesday.

"Consumer prices are expected to remain elevated for a significant period of time," BOK Gov. Shin Hyun-song made the remark during a press event. "It is expected to take some time for the energy supply chain to return to its pre-Middle East war levels and for global oil prices to stabilize."

Shin noted the fallout from high oil prices will affect not only the energy sector but other products as well, adding that the recovery trend in the South Korean economy will also put upward pressure on prices.

"Following the Middle East war, global oil prices have risen sharply, leading to a more than 20 percent increase in petroleum product prices. This has pushed core inflation into the mid-2 percent range," Shin said.

"The BOK is keenly aware that inflation will place a heavier economic burden on the public," the governor added. "We will make proactive efforts while closely monitoring consumer price trends until we gain confidence that inflation is stabilizing toward the target level."

South Korea's consumer prices rose 3.1 percent in May from a year earlier amid global energy price volatility, marking the fastest growth in 26 months after rising at the same pace in March 2024.

Earlier in the day, the central bank issued a report, noting South Korea is expected to continue facing elevated consumer prices despite the end of the Middle East conflict amid rising incomes following the boom in the technology industry.

The report said consumer prices are expected to "remain elevated for a significant period," noting upward pressures remain despite progress in peace talks between the United States and Iran.

The BOK report noted that while the government has made progress in containing the impact of higher global oil prices on inflation, upward pressure on public service charges is expected to gradually increase.

The recent rise in wages in the technology sector is also expected to affect other industries, eventually leading to additional upward pressure on consumer prices.

The analysis apparently came as South Korean tech firms, including Samsung Electronics Co. and SK hynix Inc., recently rolled out massive bonuses for their employees following record-breaking performances in the memory chip business amid the global artificial intelligence (AI) boom.

In the second half of 2026, the BOK said consumer price inflation is expected to remain around 3 percent, with core inflation, which excludes volatile food and energy prices, standing in the mid-2 percent range.

The BOK noted that rising costs caused by higher crude oil prices and the weak Korean won are expected to affect the prices of products beyond petroleum goods.

The central bank noted that during the energy price volatility caused by the war between Russia and Ukraine, higher crude oil prices had a spillover effect on non-energy products about six months later, with the impact lasting for around a year.