South Korea's inflation hit a near two-year high in April, increasing the likelihood of a central bank interest rate hike.

South Korea's April CPI rose to its highest level in nearly two years, driven by soaring oil prices triggered by the Middle East conflict. This increases the likelihood that the central bank will raise interest rates in the second half of the year to curb inflationary pressures. "Although oil prices remain high, the nationwide fuel price cap implemented by the South Korean government has limited gasoline price increases, thus easing inflationary pressures," said Chun Kyu-yeon, an economist at Hana Securities. "However, due to factors such as rising airfares, the possibility of further increases in service price inflation is rising, so the upward trend in prices will likely continue for some time." Kong Dong-rak, an economist at Daishin Securities, said, "Recent statements by the deputy governor of the Bank of Korea seem to be a step towards focusing on inflation. The Bank of Korea may signal a policy shift this month and raise interest rates at its July meeting." The Bank of Korea has kept interest rates unchanged since May 2025, and its next meeting is scheduled for May 28. (Jinshi)