(MENAFN) South Korea’s annual consumer inflation climbed above the key 2% threshold in September, fueled by rising food costs ahead of the Chuseok holiday, government data revealed on Thursday.

According to the Ministry of Data and Statistics, the Consumer Price Index (CPI) rose 2.1% year-over-year last month, accelerating from 1.7% in August. The increase pushed headline inflation just above the Bank of Korea's (BOK) medium-term target of 2%, where it has hovered in recent months.

The ministry attributed the uptick to price pressures in the lead-up to Chuseok, South Korea’s traditional harvest festival, which fell in early October this year. Costs surged particularly for livestock, fishery products, and processed food items.

Prices in the agriculture, livestock, and fishery segment grew 1.9% from a year earlier, down from the 4.8% spike seen in August. Meanwhile, industrial product prices — including fuel and packaged food — jumped 2.2%, up from 1.7% the previous month.

Fuel costs rebounded in September: oil products rose 2.3%, reversing a 1.2% decline in August. Within that, gasoline and diesel prices rose 2.0% and 4.6%, respectively.

The cost of processed foods spiked 4.2%, contributing 0.36 percentage points to the overall inflation figure.

Utility prices rose marginally by 0.3% year-on-year. While charges for city gas, heating, and tap water edged higher, electricity bills declined by 0.4%.

Service prices increased 2.2% in September, adding 1.21 percentage points to headline inflation. Public service costs climbed 1.2%, while private services, such as dining out, saw a 2.9% rise — slightly below August’s 3.1% growth.

Housing rent, including Jeonse and monthly lease agreements, rose 0.8% year-on-year. Under South Korea’s Jeonse system, tenants provide landlords with a large deposit in exchange for rent-free housing over a fixed term.

The livelihood items index, which reflects daily necessities, gained 2.5%, while the fresh food index — covering fish, fruit, vegetables, and shellfish — dropped 2.5%.

Underlying inflation also showed signs of strength. The core CPI, which strips out volatile food and energy prices, climbed 2.4% in September, up from 1.9% in August. By the OECD standard, which excludes both food and energy, core prices rose 2.0%.

Markets are now closely watching the Bank of Korea, with expectations building for further rate cuts later this year. The central bank has already slashed its benchmark interest rate four times since October 2024, bringing it to 2.50%, with 25 basis point reductions in February, May, October, and November of last year.

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