South Korea's inflation accelerates to the highest level in two years, supporting the central bank's shift to a hawkish stance.

South Korean consumer inflation accelerated to its fastest level in over two years, further solidifying the central bank's stance towards raising interest rates as the Middle East conflict continues to have a chain reaction on the economy. Data released by the South Korean government on Tuesday showed that the Consumer Price Index rose by 3.1% year-on-year in May, marking the largest increase since March 2024. Bloomberg's survey of economists had an expected median increase of 2.9%, compared to April's increase of 2.6%. The core inflation rate, which excludes volatile food and energy prices, was 2.5%, indicating that with the overall inflation rate rising, core price pressures are also beginning to expand. The latest data further supports the recent shift towards a hawkish stance by the Bank of Korea, with policymakers expecting the Iran conflict to lead to higher energy prices and worsening inflation, while the technology industry drives accelerated economic growth.