South Korea Inflation Slows More Than Expected

South Korea’s annual inflation rate rose to 2.2% in March 2026, up from 2.0% in the previous two months but less than market forecasts of 2.4%. It was the highest reading since December, breaching the central bank’s 2% target. Price growth accelerated for alcohol and tobacco (0.6% vs 0.4% in February), housing (1.5% vs 1.3%), furnishings, household equipment & routine maintenance (3.2% vs 2.9%), health (1.3% vs 1.1%), transport (5.0% vs 1.1%), communication (0.6% vs 0.4%), and recreation & culture (2.8% vs 0.9%). Meanwhile, the cost of food & non-alcoholic beverages increased at the mildest pace since February 2020 (0.5% vs 2.9%). Inflation also slowed for clothing (2.1% vs 2.4%), education (1.1% vs 1.5%), restaurants & hotels (2.7% vs 2.8%), and miscellaneous goods & services (4.6% vs 5.0%). On a monthly basis, consumer prices went up 0.3%, holding steady for the second straight month but falling short of estimates of 0.6%.

South Korea’s annual inflation rate held at 2% in February 2026, unchanged from January and slightly below market expectations of 2.1%. The latest reading remained in line with the central bank’s target, indicating that overall price pressures were largely contained before the Iran conflict triggered renewed volatility in global energy markets. The escalating Middle East conflict rattled financial markets and pushed energy prices sharply higher, stoking inflation concerns and prompting policymakers to reassess their outlooks. South Korea is particularly vulnerable to such shocks as it relies heavily on crude oil and natural gas imports from the Middle East. Last week, the Bank of Korea held its policy rate steady at 2.5% for a sixth consecutive meeting and raised its inflation outlook for this year to 2.2% from an earlier projection of 2.1%. On a monthly basis, consumer prices rose 0.3% in February, easing from a 0.4% increase in January which was also the consensus forecast.

South Korea’s annual inflation rate eased to 2% in January 2026 from 2.3% in December, extending its slowdown for a second straight month and marking the lowest reading since August. The figure broadly matched market expectations and the central bank’s target, as softer fuel prices and favorable base effects helped curb price pressures. Last month, the Bank of Korea held its policy rate at 2.5% and removed language pointing to the possibility of further easing, though policymakers remain vigilant about currency volatility and the inflationary impact of a weak won. Price increases were strongest in miscellaneous goods & services (5%), food & non-alcoholic beverages (2.9%), furnishings, household equipment & routine maintenance (2.9%), restaurants & hotels (2.8%), and clothing & footwear (2.4%). On a monthly basis, consumer prices rose 0.4% in January, accelerating from 0.3% in December and in line with consensus forecasts.