South Korea’s overall inflation accelerated to a 26-month high in May, providing the country’s central bank with stronger grounds to tighten policy in the coming months.

This rise in inflation reflects the growing impact of higher oil prices amid Middle East tensions and a weaker Korean won against the US dollar, both of which continue to drive up import costs. Statistics Korea announced on Tuesday that the benchmark Consumer Price Index (CPI) rose 3.1% year-on-year in May, marking the fastest pace since March 2024, compared with a 2.6% increase in April. The latest figure exceeds the median estimate of a 3.0% increase from a Wall Street Journal survey of nine economists. Month-on-month, consumer prices rose 0.5% in May, faster than the 0.3% expected in the survey. Consumer prices were also up 0.5% month-on-month in April. In May, the core CPI, which excludes volatile food and energy prices, climbed 2.5% year-on-year and 0.5% month-on-month. Last week, at the first policy meeting under Governor Shin Hyun-song, the Bank of Korea kept interest rates unchanged, but signaled a more hawkish stance, citing upside risks to growth and inflation.