Inflation expected to continue despite U.S.-Iran peace deal: BOK

Korea is expected to continue facing elevated consumer prices — despite optimism about the end of the Middle East conflict — due to rising incomes from the technology industry boom, the central bank said on Wednesday.

The Bank of Korea (BOK) report said that consumer prices are expected to "remain elevated for a significant period," noting that upward pressures remain despite progress in peace talks between the United States and Iran.

Korea's consumer prices rose 3.1 percent in May from a year earlier amid global energy price volatility, marking the fastest growth in 26 months after rising at the same pace in March 2024.

The BOK noted that while the government has made progress in containing the impact of higher global oil prices on inflation, upward pressure on public service charges is still expected to increase gradually.

The recent rise in wages in the technology sector is also expected to affect other industries, eventually leading to additional upward pressure on consumer prices.

The analysis apparently came as Korean tech firms, including Samsung Electronics and SK hynix, recently rolled out massive bonuses for their employees following record-breaking performances in the memory chip business.

The BOK said that consumer price inflation is expected to remain around 3 percent in the second half of 2026, with core inflation, which excludes volatile food and energy prices, standing in the mid-2 percent range.

Additionally, the BOK noted that rising costs — caused by higher crude oil prices and the weak won — are expected to affect prices of products beyond petroleum goods.

During the energy price volatility caused by the war between Russia and Ukraine, higher crude oil prices had a spillover effect on nonenergy products about six months later, with the impact lasting for around a year, according to the central bank.

Yonhap