South Korea’s consumer inflation moderated slightly in December, though a sharp jump in fuel prices driven by a weakening currency kept household cost pressures elevated, highlighting the economic strains posed by the won’s slide against the U.S. dollar.
Data released by Statistics Korea on Dec. 31 showed the Consumer Price Index rose 2.3% in December from a year earlier, a slight deceleration from previous months. However, energy prices surged as the won’s depreciation raised import costs, underscoring how exchange-rate volatility is complicating the country’s inflation outlook.
After dipping to 1.7% in August, inflation reaccelerated to 2.1% in September and reached 2.4% in October, remaining elevated through year-end—a pattern that reflects persistent price pressures in key spending categories.
The main upward push came from energy and food. Petroleum product prices soared 6.1% in December, the fastest pace since February, with diesel up 10.8% and gasoline up 5.7%. The spike was largely attributed to the won’s weakness, which has increased the local-currency cost of imported oil.
Prices of agricultural, livestock and fisheries products rose 4.1%, contributing 0.32 percentage point to overall inflation. The “living cost index,” which tracks frequently purchased household items, climbed 2.8%, signaling that everyday expenses remain a burden for consumers.
For all of 2025, South Korea’s consumer inflation averaged 2.1%, down from 2.3% in 2024 and the lowest annual rate since 2020, when prices rose just 0.5%. The full-year figure lands near the government’s 2% target, but the December detail reveals underlying pressures that could challenge that stability if the won remains under pressure.
Annual inflation had climbed sharply in recent years, accelerating from near zero in 2019‑2020 to a peak of 5.1% in 2022, before easing to 3.6% in 2023 and continuing to slow through 2024.
Economists note that while headline inflation is gradually stabilizing, currency-driven increases in energy prices remain a key risk—especially if the won stays weak against the dollar. The won has been one of Asia’s poorer performers against the U.S. currency over the past year, raising import costs across the economy and leaving policymakers to balance growth and price stability in a fragile exchange-rate environment.
