Prices Korean consumers paid for goods and services increased by over 2 percent in January on the rise of international oil prices and a weakened Korean currency.
The consumer price index went up by 2.2 percent in January from the previous year, marking the third consecutive month of increase, according to Statistics Korea Wednesday.
Inflation climbed back above the 2 percent level for the first time in five months since August.
The surge in prices of petroleum products was the main driver behind the increase. In January, petroleum product prices rose sharply by 7.3 percent on-year due to soaring international oil prices and the base effect from last year.
“The consumer price inflation rate increased to 2.2 percent as the price of petroleum products increased significantly due to the rise in exchange rates and oil prices,” said Bank of Korea Deputy Gov. Kim Woong during a press briefing.
The January figure also marks the sharpest growth since it hit 2.6 percent in July last year.
Personal service prices, excluding dining-out prices, jumped 3.5 percent, increasing general prices by 0.68 percent point.
Kim expects inflation to slow because of low demand, eventually stabilizing to approach the central bank's target of 2 percent. “But there are still high uncertainties involving foreign exchange and oil prices,” he said.
In its November 2024 forecast, the BOK projected a 1.9 percent price growth for 2025.
Since President Yoon Suk Yeol’s martial law declaration in early December, the Korean won has struggled with devaluation against the US dollar.
The currency fell over 1.46 percent from an average of 1434.42 won per dollar in December to 1455.79 in January.
A series of tariff actions taken or to be taken by US President Donald Trump's administration against its trading partners is also expected to increase the fluctuation of the currency in February.
“The currency market is likely to expand volatility, shaken by small and big events involving the Trump administration’s maneuvering,” said Baek Seok-hyun, an economist at Shinhan Bank.
Baek said that Europe and the semiconductor industries could be the US administration’s next targets following the announcement of tariffs imposed against China, Canada and Mexico.
“The Korean won will take a blow once the US puts the chip industries on the table, which could be within this month,” he said.
hnpark@heraldcorp.com
