South Korea's consumer prices rose 3.1% in May from a year earlier, reaching their highest level in two years and two months. The increase reflects prolonged high oil prices stemming from the Middle East war, along with a sharp rise in service prices for air travel and lodging as holiday demand surged during the extended May break. The Bank of Korea projected that inflation could hover around 3% for the time being.
According to the "May Consumer Price Trends" report released by the National Data Agency on Monday, the consumer price index stood at 119.92 last month, up 3.1% year-on-year. It was the first time the inflation rate reached the 3% range since March 2024 (3.1%), when poor harvests drove agricultural prices sharply higher. The consumer price index rose just 2% as recently as January this year, but the pace has accelerated since March (2.2%) and April (2.6%).
Petroleum products were the biggest contributor to the price increase. Oil prices climbed 24.2% from a year earlier, lifting the overall inflation rate by 0.92 percentage point. Gasoline and diesel prices rose 23.1% and 33.3%, respectively.
Service prices also gained momentum as the May holiday season overlapped. International airfares jumped 33.5%, the highest increase since the related statistics began, driven by higher fuel surcharges. Overseas group travel fees (26.3%), domestic airfares (29.0%), passenger car rental fees (25.7%), and hotel accommodation rates (9.3%) all rose, pushing personal service prices up 3.7%.
As rising oil prices pressured prices broadly, core inflation also rose 2.5%, the largest gain in two years and three months. Core inflation, which excludes volatile food and energy items, reflects underlying price trends. Living costs, which consumers feel more directly, also climbed 3.3%, adding to household burdens. The increase in living costs was the highest in two years and one month, since April 2024 (3.6%). The living-cost index comprises 144 items including energy and food that consumers purchase frequently, reflecting price pressures felt by ordinary households.
The government, however, believes oil price stabilization measures helped curb part of May's price increase. "We estimate that the petroleum product price ceiling system and the fuel tax cut policy lowered last month's inflation rate by 0.6 percentage point," an official at the Ministry of Finance and Economy said. "Without those measures, May consumer price inflation would have reached 3.7%."
Still, upward pressure on prices is expected to continue for some time, as the impact of high oil prices has yet to fully spread across the broader economy. "Considering the increases in processed food and agricultural, livestock, and fishery products, the impact of the Middle East war does not appear to have spread to other sectors yet," said Lee Doo-won, an economic trends statistics review officer at the Data Agency. "But given the supply-side time lag, we will need to keep watching prices in the second half."
The Bank of Korea forecast that inflation would not fall below the 3% range even after June, as international oil prices and service prices remain strong. "There is significant uncertainty in the future price path due to developments in the Middle East and the resulting oil price trajectory," said Lee Ji-ho, director general of the Bank of Korea's Economic Research Department. "As the oil price shock gradually spreads to other sectors, the inflation rate is likely to remain in the 3% range for the time being."
