Key insights
- South Korean inflation rose to a near two-year high in April, driven by rising oil prices due to Middle East tensions. The Bank of Korea is considering interest rate hikes in response. While South Korea's direct impact on US equities is limited, it reflects global inflationary pressures and potential monetary policy tightening, which could indirectly affect US markets.
By Jihoon Lee
SEOUL, May 6 (Reuters) - South Korea’s consumer prices rose in April at the steepest pace in nearly two years, as expected, fuelled by a surge in oil prices triggered by the Middle East conflict.
The consumer price index rose 2.6% in April from a year earlier, after rising 2.2% in March, government data showed on Wednesday, matching the median forecast in a Reuters poll and marking the biggest year-on-year rise since July 2024.
The index rose 0.5% from the month before, after rising 0.3% in the previous month, as prices of petroleum products jumped 7.9% over the month and international airfare surged 13.5%, according to the Ministry of Data and Statistics.
"While oil prices remain elevated, the rise in gasoline prices is being limited by the South Korean government’s nationwide fuel price caps, easing inflation pressure," said Chun Kyu-yeon, an economist at Hana Securities.
"However, the rising trend will remain valid for the time being, as there is also a growing possibility of service price inflation also rising due to factors such as airfare increases," Chun said.
The deputy governor of the Bank of Korea said this week it was time to consider interest rate hikes, as inflationary pressure was still high even after policy measures. Nationwide fuel price caps were introduced in March for the first time in nearly three decades.
The Bank of Korea, which held interest rates steady last month amid heightened uncertainty over the Iran war, next meets on May 28.