South Korea’s Harmonised Inflation Rate YoY: November 2025 Analysis
The latest Harmonised Inflation Rate YoY for South Korea (SK) registered at 3.90% in November 2025, down from 4.60% in October. This report draws on the Sigmanomics database and provides a comprehensive review of recent inflation trends, macroeconomic indicators, and policy implications. We compare the current print with historical data, assess monetary and fiscal policy stances, and explore external risks shaping the inflation outlook.
Table of Contents
South Korea’s Harmonised Inflation Rate YoY eased to 3.90% in November 2025, marking a notable decline from the 4.60% recorded in October. This figure remains above the 12-month average of approximately 4.30%, signaling a moderation but persistent inflationary pressures. The current rate is the lowest since May 2025, when inflation was also 3.90%, reflecting a potential turning point after several months of elevated price growth.
Drivers this month
- Shelter costs contributed 0.22 percentage points (pp), a slight decrease from last month.
- Energy prices declined, subtracting -0.15 pp, reflecting easing global oil prices.
- Food inflation remained steady, adding 0.18 pp, supported by domestic supply constraints.
Policy pulse
The 3.90% inflation rate remains above the Bank of Korea’s 2% target, but the downward trend supports a cautious easing of monetary tightening. The central bank’s recent rate hikes appear to be moderating demand-driven inflation without triggering a sharp slowdown.
Market lens
Immediate reaction: The KRW/EUR currency pair strengthened by 0.30% within the first hour post-release, reflecting market optimism on inflation cooling. Two-year government bond yields fell by 8 basis points, signaling reduced expectations for aggressive rate hikes.
Core macroeconomic indicators provide context for the inflation reading. South Korea’s GDP growth for Q3 2025 was revised slightly downward to 2.10% YoY, indicating moderate economic expansion. Unemployment remains low at 3.40%, supporting wage growth that feeds into inflationary pressures.
Monetary Policy & Financial Conditions
The Bank of Korea has maintained its policy rate at 3.25% since September 2025, after a series of hikes earlier in the year. Financial conditions have tightened, with credit growth slowing to 5.20% YoY from 6.00% in mid-2025. Inflation expectations, as measured by breakeven inflation rates, have declined from 3.80% to 3.40% over the past month.
Fiscal Policy & Government Budget
Fiscal policy remains moderately expansionary, with the government running a deficit of 2.70% of GDP in 2025. Increased spending on social welfare and infrastructure supports domestic demand but risks sustaining inflation above target if unchecked.
External Shocks & Geopolitical Risks
Global commodity price volatility, especially in energy markets, has eased recently, aiding inflation moderation. However, geopolitical tensions in East Asia, including trade frictions and supply chain disruptions, continue to pose upside risks to inflation.
Drivers this month
- Energy prices fell by 4.50% MoM, reducing inflationary pressure.
- Shelter inflation slowed to 3.10% YoY from 3.70% last month.
- Food prices increased modestly by 0.80% YoY, influenced by seasonal factors.
Policy pulse
The Bank of Korea’s inflation target of 2% remains distant, but the recent decline supports a potential pause in rate hikes. Inflation expectations have adjusted downward, reducing pressure on monetary policy to tighten further.
Market lens
Immediate reaction: South Korean government bond yields declined, with the 2-year yield dropping from 3.45% to 3.37%. The KRW appreciated against the EUR and USD, reflecting improved investor confidence in inflation control.
This chart highlights a clear inflection point in South Korea’s inflation trajectory. The downward trend suggests easing price pressures, but inflation remains above target. Market signals imply a cautious approach by policymakers, balancing growth and inflation risks.
Looking ahead, South Korea’s inflation outlook is shaped by several key factors. The base case scenario projects inflation stabilizing around 3.50% in early 2026, supported by moderating energy prices and subdued wage growth. However, risks remain on both sides.
Bullish Scenario (20% probability)
- Global commodity prices fall sharply, pushing inflation below 3% by mid-2026.
- Monetary policy loosens as inflation expectations normalize.
- Strong fiscal discipline limits demand-pull inflation.
Base Scenario (60% probability)
- Inflation remains between 3.50% and 4.00% through 2026.
- Monetary policy holds steady, balancing growth and inflation risks.
- External shocks remain contained but persistent supply constraints keep prices elevated.
Bearish Scenario (20% probability)
- Geopolitical tensions disrupt supply chains, pushing inflation above 4.50%.
- Wage pressures accelerate, forcing further monetary tightening.
- Fiscal stimulus intensifies, fueling demand-driven inflation.
Overall, the inflation trajectory will depend heavily on external commodity markets, domestic wage dynamics, and policy responses. The Sigmanomics database methodology relies on harmonised price indices adjusted for seasonal and structural factors, ensuring comparability across months and years.
South Korea’s November 2025 Harmonised Inflation Rate YoY at 3.90% signals a welcome easing from recent peaks but remains above the central bank’s comfort zone. Policymakers face a delicate balancing act between sustaining growth and anchoring inflation expectations. External risks, particularly geopolitical tensions and commodity price volatility, could disrupt this fragile equilibrium.
Financial markets have responded positively to the inflation moderation, with bond yields and the KRW strengthening. However, vigilance is warranted as inflation remains sticky and fiscal policy continues to support demand. Investors and policymakers should prepare for a range of outcomes, with flexibility key to navigating the evolving macroeconomic landscape.
Key Markets Likely to React to Harmonised Inflation Rate YoY
The Harmonised Inflation Rate YoY is a critical gauge for South Korea’s economic health, influencing currency, bond, and equity markets. Key tradable instruments that historically track this indicator include:
- KOSPI: South Korea’s benchmark equity index, sensitive to inflation-driven monetary policy changes.
- KRWEUR: The Korean won to euro currency pair, reflecting inflation and interest rate differentials.
- KRWUSD: The won-dollar pair, a barometer for external trade and capital flows impacted by inflation.
- BTCUSD: Bitcoin’s USD pair, often viewed as an inflation hedge and risk sentiment proxy.
- SAMSUNG: A major South Korean tech stock, sensitive to domestic economic conditions and inflation.
Inflation vs. KOSPI Index Since 2020
| Year | Average Harmonised Inflation Rate YoY (%) | KOSPI Year-End Level |
|---|---|---|
| 2020 | 0.50 | 2,873 |
| 2021 | 2.10 | 3,068 |
| 2022 | 3.70 | 2,400 |
| 2023 | 4.00 | 2,600 |
| 2024 | 3.80 | 2,850 |
| 2025 (est.) | 4.30 | 2,900 |
Insight: The KOSPI index tends to dip during periods of rising inflation, as seen in 2022, but recovers when inflation stabilizes. This inverse correlation underscores inflation’s impact on equity valuations.
Frequently Asked Questions
- What is the Harmonised Inflation Rate YoY for South Korea?
- The Harmonised Inflation Rate YoY measures the annual change in consumer prices using a standardized methodology across countries, allowing for consistent inflation comparisons.
- How does the latest inflation reading affect South Korea’s economy?
- The 3.90% inflation rate suggests easing price pressures but remains above the central bank’s 2% target, influencing monetary policy and financial markets.
- What are the main risks to South Korea’s inflation outlook?
- Key risks include geopolitical tensions, commodity price volatility, wage growth, and fiscal policy decisions that could either accelerate or contain inflation.
Final Takeaway
South Korea’s inflation is moderating but remains elevated, requiring careful policy calibration amid external uncertainties. Market reactions suggest cautious optimism, yet vigilance remains essential.
Sources
- Sigmanomics database, Harmonised Inflation Rate YoY, South Korea, November 2025 release.
- Bank of Korea, Monetary Policy Reports, 2025.
- South Korea Ministry of Economy and Finance, Fiscal Data 2025.
- International Energy Agency, Commodity Price Reports, 2025.
Key Markets Likely to React to Harmonised Inflation Rate YoY
The following tradable symbols historically correlate with South Korea’s inflation trends and monetary policy shifts:
- KOSPI – South Korea’s main equity index, sensitive to inflation and policy changes.
- KRWEUR – Currency pair reflecting inflation-driven interest rate differentials.
- KRWUSD – Key forex pair impacted by trade and capital flows amid inflation shifts.
- BTCUSD – Bitcoin as an inflation hedge and risk sentiment indicator.
- SAMSUNG – Major South Korean stock, reflecting domestic economic conditions.
The Harmonised Inflation Rate YoY for November 2025 at 3.90% marks a 0.70 percentage point drop from October’s 4.60%, and sits below the 12-month average of 4.30%. This decline reverses a three-month upward trend that peaked in July and August at 4.60%. The easing is driven largely by falling energy prices and a slowdown in shelter inflation.
Comparing to historical data, inflation in November 2025 is lower than the 4.20% recorded in February 2025 and the 4.10% in March 2025, indicating a sustained downward trajectory since mid-year. However, it remains above the 3.50% average seen in late 2024, suggesting inflation remains sticky.