South Korea Inflation Rate YoY: November 2025 Analysis and Outlook
Table of Contents
South Korea’s headline inflation rate for November 2025 registered at 3.70% year-on-year, matching market expectations and down from 4.30% in October. This decline signals a gradual easing from the peak inflation levels seen earlier this year. The latest figure remains above the Bank of Korea’s 2% inflation target but reflects a positive trend toward moderation.
Drivers this month
- Energy prices contributed -0.30 percentage points, reflecting lower global oil and gas costs.
- Food inflation remained steady, adding 0.50 percentage points, supported by stable domestic agricultural output.
- Services inflation edged up slightly, adding 0.20 percentage points, driven by wage pressures.
Policy pulse
The 3.70% inflation rate sits above the central bank’s target but below recent peaks, suggesting some relief for monetary policy. The Bank of Korea’s recent rate hikes appear to be tempering demand-side pressures, though core inflation remains sticky.
Market lens
Immediate reaction: The South Korean won (KRW) appreciated modestly by 0.30% against the USD within the first hour after the release, reflecting market optimism about easing inflation pressures. Short-term bond yields declined by 5 basis points, signaling expectations of a slower pace of monetary tightening.
Examining core macroeconomic indicators alongside inflation provides a fuller picture of South Korea’s economic health. GDP growth for Q3 2025 was 2.10% YoY, slightly below trend but resilient amid global uncertainties. Unemployment held steady at 3.40%, indicating a tight labor market that supports wage growth and inflation persistence.
Monetary Policy & Financial Conditions
The Bank of Korea has raised its policy rate by 125 basis points since early 2025, aiming to rein in inflation without derailing growth. Financial conditions have tightened, with credit growth slowing to 4.50% YoY from 6.20% a year ago. The yield curve has flattened, reflecting market expectations of slower rate hikes ahead.
Fiscal Policy & Government Budget
Fiscal policy remains moderately expansionary. The government’s budget deficit widened to 3.80% of GDP in 2025, driven by social spending and infrastructure investments. However, rising public debt at 45% of GDP limits further stimulus, constraining fiscal space amid inflation moderation.
External Shocks & Geopolitical Risks
South Korea faces ongoing geopolitical risks from regional tensions and supply chain disruptions. Recent volatility in global commodity markets, especially oil and food, continues to influence inflation dynamics. The country’s export sector remains vulnerable to slowing demand from China and the US.
Market lens
Immediate reaction: Following the release, the USDKRW pair declined 0.30%, reflecting KRW strength. The 2-year government bond yield fell 5 basis points, indicating market expectations of a slower pace of rate hikes. Equity markets showed mild gains, with the KOSPI index rising 0.40%.
This chart highlights a clear downward trend in inflation since August 2025, signaling that monetary tightening and external factors are beginning to ease price pressures. The moderation suggests inflation is moving closer to the Bank of Korea’s target, though vigilance remains necessary given external risks.
Looking ahead, South Korea’s inflation trajectory will depend on several key factors. The Bank of Korea’s monetary policy stance, global commodity prices, and geopolitical developments will shape the inflation path through 2026.
Bullish scenario (20% probability)
- Global energy prices fall sharply, easing cost-push inflation.
- Monetary tightening successfully anchors inflation expectations.
- Domestic demand stabilizes without overheating.
- Inflation falls below 2.50% by mid-2026.
Base scenario (60% probability)
- Inflation gradually declines to near 2% by late 2026.
- Monetary policy remains cautious but data-driven.
- Moderate wage growth sustains services inflation.
- External shocks cause temporary volatility but no sustained spikes.
Bearish scenario (20% probability)
- Geopolitical tensions disrupt supply chains, pushing prices higher.
- Global commodity prices rebound sharply.
- Wage pressures accelerate, leading to persistent core inflation above 3%.
- Bank of Korea forced into aggressive rate hikes, risking growth slowdown.
Policy pulse
The Bank of Korea is likely to pause rate hikes in the near term, monitoring inflation trends closely. Any upside surprises could prompt further tightening, while sustained easing may open room for rate cuts in late 2026.
South Korea’s November 2025 inflation print of 3.70% YoY signals a welcome cooling from recent highs but remains above the central bank’s target. The interplay of moderating energy costs, stable food prices, and persistent wage pressures creates a nuanced inflation environment. Monetary policy has begun to show effects, but external risks and structural factors warrant cautious optimism.
Financial markets have responded positively to the easing inflation, with the KRW strengthening and bond yields softening. Fiscal policy continues to support the economy but faces constraints from rising debt. Looking forward, inflation is expected to trend downward toward 2% by mid-2026 under the base case, though risks remain skewed to the upside.
Investors and policymakers should watch commodity markets, wage dynamics, and geopolitical developments closely. The Bank of Korea’s data-driven approach will be critical in navigating the delicate balance between inflation control and growth support.
Key Markets Likely to React to Inflation Rate YoY
South Korea’s inflation data typically influences currency, bond, and equity markets. The USDKRW currency pair reacts strongly to inflation surprises, reflecting monetary policy expectations. The KOSPI equity index often moves on inflation-driven growth outlooks. The SK stock ticker, representing a major conglomerate, is sensitive to domestic economic conditions. On the crypto side, BTCUSDT can reflect risk sentiment shifts tied to inflation trends. Lastly, the EURUSD pair is relevant due to trade linkages and global monetary policy influences.
Inflation vs. USDKRW Since 2020
Since 2020, South Korea’s inflation rate and the USDKRW exchange rate have shown a moderate inverse correlation. Periods of rising inflation often coincide with KRW depreciation due to expectations of tighter monetary policy and risk aversion. For example, the inflation spike in mid-2025 corresponded with USDKRW rising from 1150 to 1200. The recent easing to 3.70% has seen the KRW strengthen by approximately 1.50% against the USD, underscoring the currency’s sensitivity to inflation dynamics.
FAQ
- What is the current Inflation Rate YoY for South Korea?
- The latest inflation rate for South Korea is 3.70% year-on-year as of November 2025, down from 4.30% in October.
- How does the inflation rate affect South Korea’s monetary policy?
- Inflation above the 2% target has led the Bank of Korea to tighten monetary policy, but recent easing may allow for a pause in rate hikes.
- What are the main risks to South Korea’s inflation outlook?
- Key risks include geopolitical tensions, commodity price volatility, and persistent wage pressures that could keep inflation elevated.
Takeaway: South Korea’s inflation is cooling but remains above target, requiring balanced monetary policy amid external uncertainties.
This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.
KOSPI — South Korea’s benchmark equity index, sensitive to inflation and growth outlooks.
SK — Major South Korean conglomerate, reflecting domestic economic conditions.
USDKRW — Currency pair highly responsive to inflation and monetary policy changes.
BTCUSDT — Cryptocurrency pair reflecting risk sentiment shifts linked to inflation trends.
EURUSD — Major forex pair influenced by global monetary policies affecting South Korea.









South Korea’s inflation rate of 3.70% in November 2025 compares to 4.30% in October and a 12-month average of 3.80%. This marks a clear reversal from the upward trend seen since mid-2025, when inflation peaked at 4.40% in August. The easing reflects cooling energy prices and stable food costs, offsetting persistent wage-driven service inflation.
Compared to the previous year, inflation has remained elevated but shows signs of peaking. The 3.70% reading is above the 3.20% recorded in December 2024 but below the 4.00% average for the first half of 2025. This suggests a transition phase from high inflation to a more stable environment.