I have been closely monitoring how inflation in South Korea has been pressuring monetary policymakers, and the situation is becoming more complex each month. In October, consumer prices rose 2.4% year-over-year, surpassing economists' expectations of 2.2%, and marking the highest level since July 2024 when it reached 2.6%.

What’s interesting here is what’s happening behind these numbers. The won depreciated nearly 2% against the dollar in October, hitting its lowest point since March, and this has a direct impact on South Korea’s inflation. When your currency depreciates, everything imported becomes more expensive: energy, food, fuels. Consumers felt this especially because the government cut fuel subsidies right at that moment, which drove up oil prices.

Data showed that non-alcoholic food and beverage prices increased 5% year-over-year, while transportation became 3.4% more expensive. Core inflation, which excludes food and energy, also rose to 2.2%, both metrics now above the Bank of Korea’s 2% target.

Meanwhile, the BOK keeps its interest rate unchanged for the third consecutive meeting. Barclays economist Bumki Son notes that some of these price increases are temporary: spending during Chuseok and adjustments in imported car prices explain part of the movement. The central bank seems to be betting that these inflationary pressures in South Korea will moderate when looking at long-term trends.

But here’s the dilemma: while inflation rises, Seoul’s housing market continues to buzz, with apartment prices increasing for 39 consecutive weeks. The BOK is caught between maintaining price stability and not choking an economy already facing rising household debt. Barclays anticipates rate cuts may come soon, especially considering U.S. tariffs that threaten South Korea’s economic performance.

What’s clear is that the weak won will remain a key factor in how inflation evolves in South Korea in the coming months. The central bank has little room to maneuver while trying to maintain credibility in its inflation control.