South Korea’s inflation accelerated at a faster-than-expected pace to hit a nearly 14-year high in May, pressuring the central bank to tighten policy further to curb price growth.
The benchmark consumer-price index rose 5.4% from a year earlier — the fastest since August 2008 in the country –following a 4.8% gain in April, the statistical office said Friday. That beat a median market forecast for a 5.1% increase for May.
Higher prices of oil and other commodities as well as rising services charges and utility bills continued to add to inflationary pressure, the office said.
Compared with the prior month, the index rose 0.7%, unchanged from April. That beat the median forecast of a 0.4% increase for May.
Core CPI, which strips out volatile energy and food prices, rose 3.4% from a year earlier and 0.5% from a month ago, faster than the gains of 3.1% and 0.4%, respectively, in April.
The Bank of Korea at its latest policy meeting in May raised its base rate by 25 basis points to 1.75% — the fifth rate increase since August 2021 — to fight inflation.
The central bank expects inflation to average 4.5% for 2022, higher than its earlier forecast, signaling it would tighten policy further in the coming months.
The country’s headline inflation remained above the bank’s 2% annual target for a 14th straight month.