South Korean inflation climbs to 13-year high

South Korea’s year-on-year consumer price index rose to 4.8% in April, the highest in over a decade, up from previous highs of 4.1% in March. Meanwhile, the produce price index was 8.8% in March, Bank of Korea data shows. 

The central bank convened an internal meeting to address inflation and surrounding expectations, Reuters reported.  

South Korea was the first major Asian economy to begin raising interest rates in August last year, putting an end to a period of record-low interest rates. The Bank of Korea had slashed the policy rate to 0.5% in May 2020 in response to the pandemic. The latest hiking cycle comes in response to soaring consumer debt, alongside higher prices. The board has raised rates four times in 25 basis point increments since August, taking them to 1.5% last month. 

Rhee Chang-yong, the Bank of Korea’s recently appointed governor, said during a parliamentary confirmation hearing that monetary policy will need to rein in household debt to maintain financial stability. 

Bank loans to households exceeded $800 billion in February, according to central bank data. South Korea’s GDP was $1.6 trillion in 2020.