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South Korea’s consumer inflation cooled in May, reaching its slowest pace in five months, signaling easing price pressures and potentially paving the way for further monetary policy support. According to data released by Statistics Korea on Wednesday, the consumer price index (CPI) rose 1.9% year-on-year in May, down from a 2.1% increase in April. This marked the weakest inflation rate since December 2024 and fell below the 2.1% median forecast from a Reuters poll of economists.
The slower-than-expected inflation comes as the Bank of Korea (BOK) recently lowered interest rates for the fourth time in its current easing cycle. The central bank aims to stimulate growth amid ongoing economic uncertainty, particularly surrounding the impact of U.S. tariffs on exports and manufacturing. With inflation moving below the central bank's target range, the door may now be open for further rate cuts.
Four out of seven BOK board members indicated openness to additional rate reductions within the next three months, underscoring the bank’s dovish stance. Easing inflation could reinforce this direction, providing room to bolster domestic demand and offset external economic pressures.
The softening in consumer prices also reflects subdued demand and relatively stable food and energy costs. Markets will closely watch upcoming economic indicators to assess whether the disinflationary trend persists and how it influences monetary policy decisions in the second half of the year.
South Korea's inflation trajectory remains a key focus for policymakers and investors as the country navigates a challenging global economic environment. The combination of lower inflation and an accommodative central bank signals ongoing efforts to support recovery without stoking price instability.
