Recently, the Consumer Price Index (CPI) in South Korea has risen sharply andhas been at its highest since the Asian financial crisis. Both supply and demandfactors have driven the recent high inflation. The CPI is also expected to risesharply in the second half of the year.Recent global inflation is driven by large-scale stimulus measures andgeopolitical risk factors. Even the core CPI, which excludes volatile prices, isclimbing rapidly.
As high inflation persists, economic agents’ inflation expectations are alsorising. There is the possibility that inflation-related anxiety will lead toactual price increases through second-round effects. International organizationsraised the possibility of stagflation—a recession amid inflation.
Major countries have raised their base rates and introduced various policymeasures for price stability. This year, Korea also announced pricestabilization measures such as raising its benchmark interest rate and cuttingthe fuel tax. At the same time, the government must make structural efforts toreduce price volatility.