BOK tracks domino price increases as oil and won volatility threaten inflation

  • Bank of Korea monitors spreading price increases across retailers, manufacturers and service providers.
  • More than 30 companies announced or detailed price increases across CPI categories this year.
  • BOK scenarios link prolonged Middle East tensions with higher Brent prices and inflation.

The Bank of Korea is monitoring a broadening pattern of price increases among retailers, food and beverage makers and other companies whose products feed into consumer prices. More than 30 companies have announced increases or specific plans this year in CPI categories including coffee, tires, clothing, convenience stores and dining out, nearing last year’s preliminary total of 32. The Venti, Mega MGC Coffee and Mammoth Coffee have raised prices, while Hankook Tire and Nexen Tire have announced increases for replacement and passenger-car tires. The BOK is focused on whether cost-driven increases spread from one company to competitors and across product categories, potentially creating second-round effects. Raw-material and shipping costs, along with volatile oil prices and the won-dollar exchange rate, could add to pressure in the fourth quarter. The BOK’s scenarios show that prolonged Middle East tensions could raise Brent crude to $95 a barrel in the second half, lifting consumer inflation by 0.1 percentage point this year and 0.4 percentage points next year above its baseline forecast.

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