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Korean won's prolonged weakness could push inflation to mid-2 pct range in 2026: BOK

Published: 17 Dec. 2025, 15:42

Bags of coffee beans are on display at a supermarket in Seoul on Dec. 12. [NEWS1]

The Bank of Korea (BOK) said Wednesday that consumer inflation could rise to up to the mid-2 percent range next year if the local currency remains weak against the dollar.

The Korean won has hovered near the yearly low in recent weeks, remaining below the closely watched 1,450-won level amid local investors' heavy foreign investment and offshore investors' selling of local shares following recent gains.

"The pass-through effect of the weak currency on prices could intensify if the exchange rate stays at around the current level of 1,470 won through next year," the BOK said in a released statement.

The BOK's latest inflation forecast for next year, presented last month, stands at 2.1 percent.

Consumer inflation has already picked up, rising from 2.1 percent in September to 2.4 percent in both October and November, driven by rising prices of agricultural products and petroleum products, as well as a surge in service prices due to strong holiday demand.

The central bank said prices of livestock products have begun to reflect currency effects due to higher imported beef prices, while prices of fishery products could also become more volatile depending on exchange rate movements, given their high import share.

Overall, however, core inflation is likely to remain stable at around 2 percent in 2026, reflecting the modest pace of the economic recovery. Core inflation excludes food and energy prices, which tend to be highly volatile.

"Though an economic recovery is expected to create some upward pressure on inflation, its overall impact on prices is likely to be limited," the BOK said. "The ongoing recovery is driven mainly by the semiconductor and other technology sectors, which could further limit the impact of growth on inflation."

Global oil prices, which have a significant influence on core goods prices, are expected to decline for the time being, acting as a downward factor on inflation.

"Inflationary pressure is projected to emerge mainly in non-core items, such as food and energy, which have a higher import share than core items," the central bank said.

Yonhap