The Bank of Korea said on the 17th that the consumer price index is expected to rise around 3% in the second half of this year. That would far exceed the Bank of Korea's inflation target of 2%. The Bank of Korea (BOK) noted that although the United States and Iran agreed to end the war, high oil prices are persisting and will push up overall living costs.
According to the "Review of price stability target operations" released that day by the Bank of Korea (BOK), the consumer price index in the second half of this year is forecast to rise around 3%. Core inflation, excluding food and energy, is also expected to be in the mid to upper 2% range. All of these are well above the Bank of Korea's 2% target.
The Bank of Korea expects the effects of the prolonged high oil prices and strong dollar to start taking full hold, pushing up prices even for products less related to petroleum. The Bank of Korea said, "After the second half, the oil price shock is expected to spill over to core inflation items other than petroleum products," adding, "Although the United States and Iran's end-of-war talks have made progress, upward pressure on prices remains high."
Analyzing the Ukraine war that triggered a past "energy shock," the Bank of Korea observed that the impact of high oil prices is likely to continue into next year. In fact, when the Ukraine war broke out in Feb. 2022, crude prices climbed and petroleum product prices rose immediately, and six months later, prices of manufactured goods also increased. The ripple effects on non-energy items such as manufactured goods lasted up to one year.