Key Takeaways
- South Korea’s headline inflation held steady at 2.4% year-on-year in November 2025, slightly exceeding forecasted 2.35%.
- The Bank of Korea maintained its policy rate at 2.50% for a fourth consecutive meeting amid currency pressures.
- Rising costs of food and services, notably fresh produce, continue to keep inflation above the 2% target for a third month.
On December 1, 2025, South Korea reported a 2.4% rise in headline inflation for November, reflecting persistent price pressures primarily driven by food and services. This figure slightly overshot the median forecast of 2.35%, reinforcing the Bank of Korea’s recent decision to pause its rate cuts and hold the policy interest rate steady at 2.50%. The continued elevation of inflation above the central bank’s 2% target underscores ongoing challenges linked to supply constraints and exchange rate fluctuations.
Food Prices and Monetary Policy Stance
The annual inflation rate was notably buoyed by a 5.6% increase in the agricultural and fishery product index, with fresh produce prices soaring significantly—rice surged 18.6% and mandarins jumped 26.5% compared to November 2024. Finance Minister Koo Yun-cheol attributed these rises to adverse weather patterns, such as frequent rain, as well as the depreciation of the Korean won, which heightened costs for importing agricultural, fishery, and petroleum goods. Processed food prices remain elevated following sharp increases earlier in the year.
The Bank of Korea opted to maintain the benchmark interest rate at 2.50% for the fourth straight meeting. The central bank cited the won’s recent weakness as a limiting factor for further monetary easing, signaling that its current rate cut cycle might be nearing its end. The cautious policy tone reflects the delicate balancing act of containing inflation without exacerbating currency depreciation.
Consumer Price Index and Analyst Forecasts
On a monthly basis, the consumer price index (CPI) declined by 0.2%, slightly less than the 0.25% drop anticipated by economists. Core inflation, which excludes volatile food and energy prices, rose by 2.0% year-on-year, illustrating that underlying inflationary pressures remain firm. This resilience has shaped market expectations of a limited easing trajectory in the near term.
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Analyst Scenarios
Most analysts now forecast one additional rate cut by the Bank of Korea in the first quarter of 2026, followed by an extended pause. The pause will enable policymakers to monitor inflation trends and currency movements closely amid ongoing global economic uncertainties.
Inflation: Market Outlook
South Korea’s headline inflation holding at 2.4% year-over-year highlights the continued upward pressure from food and service sectors, keeping inflation above the 2% target for the third consecutive month. The Bank of Korea’s decision to maintain rates at 2.50% has tempered market expectations for aggressive easing next year, focusing instead on a measured approach. Investors and policymakers will be closely watching upcoming inflation data and won dynamics, which will be crucial for guiding the country’s monetary policy direction in this pivotal East Asian economy.
