Trend Demand-side inflation pressure building in Korea as the chip export boom spreads to domestic demand

Summary

A Bank of Korea issue analysis argues that the effects of booming semiconductor exports are now spreading into domestic demand. Supply-side pressures such as high oil prices, which drove inflation in the first half of 2026, are expected to fade gradually. Meanwhile the continuing economic upturn is expected to enlarge demand-side pressure on prices. Improved terms of trade from the chip boom have pushed growth of real gross domestic income well above GDP growth. The resulting rise in the real purchasing power of households and firms could amplify demand pressure further. The analysis examines the effect through core inflation because it is less affected by supply shocks and temporary factors than headline inflation.