South Korea Inflation Rate at 3-Month Low of 2.8%

South Korea’s annual inflation rate rose to 3.1% in August 2026 from 2.8% in July, moving further above the central bank’s 2% target but below market expectations of 3.2%. The increase was largely driven by a one-off factor of low-base effect from temporary mobile-service discounts last year, with mobile service fees surging 26.7% year-on-year and lifting public-service prices by 6.5%. Petroleum prices also remained elevated, rising 14.2%, although slower than the 15.5% increase in July. Excluding the temporary impact of mobile fees, inflation would have been around 2.5%, according to the Finance Ministry, while nationwide fuel-price caps reduced the headline rate by 0.3 percentage points. Meanwhile, core inflation, excluding food and energy, accelerated sharply to 3.4% from 2.6%, marking its fastest annual increase since May 2023. On a monthly basis, consumer prices rose by 0.2% in August, falling short of market estimates for a 0.3% gain but rebounding from a 0.2% decline in July.

South Korea’s annual inflation rate slowed to 2.8% in July 2026, marking the softest increase since April and down from 3.2% in the previous month, which was the fastest pace since December 2023. The latest reading was below market expectations of 3.0%, though it remained above the central bank’s 2% target. Transport inflation eased (7.7% vs 11.1% in June), as the impact of rises in diesel and gasoline prices started to fade. Food and non-alcoholic beverages inflation also moderated to a three-month low (0.9% vs 2.0%), as did alcoholic beverages and tobacco (0.2% vs 0.5%). By contrast, inflation accelerated for housing and utilities (1.8% vs 1.7%), clothing and footwear (2.8% vs 2.6%), recreation and culture (5.5% vs 5.4%), and restaurants and hotels (2.8% vs 2.7%). On a monthly basis, consumer prices unexpectedly fell 0.2%, compared with market forecasts of a 0.1% rise, marking the first monthly decline since November 2025, due to lower transport, food, and housing prices.

South Korea will step up efforts to rein in inflation as renewed Middle East tensions threaten to lift oil prices and disrupt supply chains. Finance Minister Koo Yun-cheol said authorities remain alert to external risks and aim to bring consumer inflation, which has held above 3% in recent months, back to the 2% range by July. Prices rose 3.2% yoy in June, the fastest pace since December 2023. Koo added that detailed measures to curb unfair market practices and bolster price-stabilization policies will be unveiled next month. Planned revisions to the Price Stabilization Act, expected in August, would toughen penalties for hoarding and allow earlier disposal of seized goods. The government also pledged to ensure expanded tariff-rate quota programs feed through to lower consumer prices in the second half, reinforcing efforts to ease inflationary pressures.