Bank of Korea: Demand Pressure Will Offset Oil Price Decline, Keeping Inflation High

The Bank of Korea has projected that despite a decline in international oil prices, inflation will remain elevated due to increased demand pressures stemming from economic recovery.

Lee Ji-ho, Deputy Governor of the Bank of Korea, stated during a price situation review meeting on July 2 at the bank's headquarters in Seoul, "The future consumer price inflation rate will continue to be high as the downward pressure from falling international oil prices is offset by increased demand pressures from economic improvement."

According to data released by the National Statistical Office, the consumer price index for June rose 3.2% compared to the same month last year, marking a second consecutive month of growth in the 3% range, following a 3.1% increase in May. While the rate of increase in travel-related service prices, which had spiked the previous month, has slowed, oil prices surged by 24.7% year-on-year, and the price increase for agricultural, livestock, and fishery products also expanded to 3.2%.

Deputy Governor Lee noted, "The consumer prices in June rose more than the previous month due to the continued high increase in oil prices and a larger rise in agricultural, livestock, and fishery product prices. The inflation rate for living expenses remains high in the mid-3% range, significantly impacting vulnerable households."

He added, "We expect the consumer price inflation rate in July to be slightly lower than in June due to the decline in international oil prices and government price stabilization measures. However, core inflation is anticipated to remain high due to the transmission of cost shocks and increased demand pressures, so we will continue to monitor the price situation with caution."