South Korea Inflation and Rate Hike Outlook

South Korea's inflation hit 3.1% in May, prompting ING to forecast a Bank of Korea rate hike cycle starting in July 2026.

Key Takeaways

• 1.South Korea's CPI inflation rose to 3.1% YoY in May, exceeding both market consensus (2.9%) and ING's forecast (3.0%).
• 2.ING expects the Bank of Korea (BoK) to commence a tightening cycle with 25bp rate hikes in July and October 2026, and another in H1 2027.
• 3.Core inflation (excluding food and energy) accelerated to 2.5%, indicating that price pressures are broadening beyond energy.

Table of Contents

• Hotter-than-expected prices put South Korea on track for July rate hike
• Consumer inflation accelerated faster than expected
• BoK is set to deliver rate hikes as early as July
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