Airfare, fuel costs drive price surge

BOK: June inflation likely to mirror May

Lee Ji-ho, head of the Bank of Korea's research department. [Bank of Korea]
Lee Ji-ho, head of the Bank of Korea's research department. [Bank of Korea]

Consumer price inflation accelerated to 3.1 percent in May, and the Bank of Korea said it expects prices to remain in the 3 percent range for now.

Lee Ji-ho, head of the Bank of Korea's research department, said at a price situation review meeting Monday that inflation would stay in the 3 percent range as the oil price shock gradually spreads to other sectors. He added that June inflation would likely come in at a similar level to May, with petroleum product prices continuing to rise sharply.

The rate of increase in petroleum product prices widened from 21.9 percent in April to 24.2 percent in May. Prices for agricultural, livestock and fishery products swung from a 0.5 percent decline in April to a 2.2 percent gain in May, driven by increases of more than 5 percent in meat and seafood prices.

Core inflation also rose, climbing from 2.2 percent to 2.5 percent, pushed up by higher service prices — particularly domestic and international airfare and passenger car rental fees.

The lifestyle price index, which tracks the cost of goods and services frequently purchased by households, rose to 3.3 percent — up sharply from 2.9 percent the previous month and the highest reading since April 2024, when it stood at 3.6 percent.

Lee said May's consumer price rise was driven by a wider increase in petroleum product prices alongside sustained gains in travel-related services, including domestic and international airfare. He said the jump in lifestyle inflation to the low-to-mid 3 percent range had increased the cost-of-living burden on vulnerable groups, who spend a larger share of their household budgets on essential goods.

Lee went on to say that significant uncertainty surrounds the outlook — particularly regarding developments in the Middle East and their effect on oil prices — but that the oil price shock is expected to spread gradually to other sectors, keeping inflation in the 3 percent range for now. "We will monitor the price situation closely and with heightened vigilance," he said.

According to the Ministry of Statistics, the consumer price index stood at 119.92 (base year 2020=100) in May, up 3.1 percent from a year earlier. That marks the largest year-on-year increase since March 2024, when poor harvests sent agricultural prices sharply higher.

Monthly consumer price inflation held steady at 2.0 percent in both January and February, but has surged since the outbreak of the Middle East war — rising to 2.2 percent in March, 2.6 percent in April and 3.1 percent in May.

The surge in global oil prices triggered by the Middle East war has dealt a direct blow to overall inflation. Petroleum product prices jumped 24.2 percent, adding 0.92 percentage points to the overall index — the highest rate of increase since July 2022, when prices rose 35.2 percent in the early months of the Russia-Ukraine war.


forest@heraldcorp.com