South Korea's consumer price index rose 2.6 percent in May from a year earlier, the highest since April 2012, according to data released by the Statistics Office of the Republic of Korea on Friday.
South Korea's consumer price index rose just 0.6 per cent in January and has risen every month since.
The Yonhap News Agency reported that due to reduced crop production and the avian flu epidemic, the prices of agricultural and sideline products have increased by a double-digit percentage, pushing up the cost of materials and services across the board. Higher international oil prices push up the price of industrial goods.
Prices for agricultural and sideline products and petroleum rose 12.1 percent and 23.3 percent, respectively, in May, according to data released on February 2. Excluding agricultural and energy prices, the core price index rose 1.5 per cent from a year earlier.
There are signs that South Korean consumer demand is recovering. Spending on food, beverage and hotel increased by 2% and spending on entertainment increased by 1%, but spending on communications decreased by 2.1%.
According to Bloomberg News, if South Korea's consumer sector accelerates its recovery, price pressures will increase.
"The government will prepare for inflation risks becoming a reality, prevent excessive inflation expectations and take measures to stabilise the cost of living," said Hong Nye-ki, finance minister.
Ms. Hong said the government would increase egg imports to at least five million from four million, expand rice supplies and provide loans to companies that help procure commodities.
The Bank of Korea, the country's central bank, last week kept its benchmark interest rate unchanged at a historic low of 0.5%, raising its forecast for economic growth this year to 4% and predicting inflation of 1.8% this year and 1.4% next year.
Lee Jul-yeol, governor of the Bank of Korea, said the central bank is preparing to tighten its ultra-loose stimulus policy during the COVID-19 epidemic in the face of accelerating inflation and other problems.
In May 2020, South Korea's economy once fell into deflation due to the impact of COVID-19 on demand and supply chain. The Bank of Korea used to have an inflation target of 2%.
ANZ Research forecasts in a research note that the Bank of Korea will start to normalize monetary policy in the first quarter of 2022, but the first rate hike may come as early as the fourth quarter of 2021, considering the speed of vaccination.