South Korea’s inflation picks up, backing case for BOK pause
The government is looking to support growth with an extra budget totalling 10 trillion won to address trade risks and help recovery efforts in the south after the area was hit by wildfires
[SEOUL] South Korea’s consumer inflation unexpectedly accelerated as weakness in the won helped boost import costs, giving the central bank an incentive to pause its monetary easing campaign when authorities gather to set policy later this month.
Consumer prices advanced 2.1 per cent in March from a year earlier, accelerating from the 2 per cent pace of gains in February, the statistics office reported on Wednesday (Apr 2). Economists surveyed by Bloomberg had forecast the pace of price growth would slow to 1.9 per cent. Core prices excluding food and energy rose 1.9 per cent from the previous year.
Policymakers will parse on Wednesday’s data as they seek to support the economy, just as US President Donald Trump’s tariff campaign threatens to weigh on exports. While most economists expect the Bank of Korea (BOK) to stand pat when it next sets policy on Apr 17, as authorities assess the impact of the February rate cut, many see the possibility of a move next month after the impact of protectionist trade policies becomes clearer.
The BOK said core prices are expected to remain stable at levels near its 2 per cent target. “But we need to closely monitor the future inflation situation as uncertainties over exchange rates, oil price movements and domestic demand remain high,” it said.
After imposing tariffs on products including steel, autos and auto parts, Trump is set to unveil so-called reciprocal tariffs on US trading partners later in the global day. Trump has said the measures will rectify tariffs as well as non-tariff barriers that he says are unfair.
The consumer price report showed service costs rose 2.3 per cent from a year earlier while product prices were up 1.7 per cent.
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The won was Asia’s worst-performing leading currency last year, driving up costs for imported food and fuel. It’s marginally lower versus the US dollar in 2025. Imported beef costs jumped 5.6 per cent from a year earlier, outpacing overall food prices that ticked up 2.4 per cent, while prices for petrol products also rose.
The BOK has so far cut its benchmark interest rate three times since its pivot in October, after confirming inflationary trends were largely in line with its views. The government is looking to support growth with an extra budget totalling 10 trillion won (S$9.2 billion) to address trade risks and help recovery efforts in the south after the area was hit by wildfires. Also, steps to help the auto industry are expected this month.
“The BOK’s focus for now will be on the slowdown of the economy,” Ha Keon-hyeong, an economist at Shinhan Securities said. “With limited room for further rate cuts, it would want to save that card to use in conjunction with fiscal policies such as supplementary budget.”
The political turmoil sparked by President Yoon Suk-yeol’s short-lived imposition of martial law in December and the uncertainty in the wake of that incident have weighed on consumer and business sentiment. Retail sales growth slowed to 4.4 per cent in February from 11.7 per cent, while a gauge of consumer confidence weakened to 93.4 in March from 95.2.
The Constitutional Court will announce on Friday whether Yoon will be permanently ousted from office or restored to power as the nation’s president.
So far, external demand has held up, partly because overseas firms were rushing to procure goods before Trump’s tariffs kick in. Exports rebounded in March, with semiconductor shipments rising 11.9 per cent from a year earlier on the back of strong demand for high-value-added products such as high-bandwidth memory. BLOOMBERG
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