Major financial institutions have raised their 2026 inflation forecasts for South Korea, citing the continued weakness of the Korean won against the U.S. dollar. According to Bloomberg's compilation from 37 institutions, the median projection stands at 2 percent, up 0.1 percentage point from 1.9 percent at the end of last month. The Bank of Korea has also warned that consumer inflation could reach the mid-2 percent range if the domestic currency remains weak.
Major financial institutions, including global investment banks, have revised upward their forecasts for South Korea's consumer inflation in 2026, driven by the persistent weakness of the Korean won against the U.S. dollar. Bloomberg's aggregation of projections from 37 institutions shows a median forecast of 2 percent, marking a 0.1 percentage point increase from the 1.9 percent reported at the end of last month. During this period, 14 institutions raised their outlooks, three lowered them, and the rest remained unchanged.
Last month, the Bank of Korea updated its 2026 inflation projection to 2.1 percent from the prior 1.9 percent. The central bank cautioned that if the won stays weak, consumer inflation could climb into the mid-2 percent range.
The Korean won has lingered near its yearly low in recent weeks, approaching the 1,500 won per dollar mark this week after breaching the psychologically significant 1,450 level in November for the first time since April. However, on Wednesday, it recorded its sharpest daily gain against the dollar in over three years, following strong verbal intervention from foreign exchange authorities.
This currency depreciation is fueling imported inflation pressures, which underpins the upward revisions in forecasts by financial institutions.
